<PAGE>
Table of Contents
1 Letter to Shareholders
2 Management's Discussion and Analysis
39 Statements of Assets and Liabilities
47 Statements of Operations
51 Statements of Changes in Net Assets
58 Portfolios of Investments
156 Notes to Financial Statements
174 Financial Highlights
190 Report of Independent Public Accountants
Pegasus Funds are not bank
deposits or obligations of, or
guaranteed or endorsed by First
Chicago NBD Corporation or any
of its affiliates, and are not
federally insured or guaranteed
by the U.S. government, FDIC,
or any governmental agency.
Investment in the Funds
involves risks, including the
possible loss of principal.
PEGASUS FUNDS
(800) 688-3350
INVESTMENT ADVISER
First Chicago NBD Investment Management Company (FCNIMCO)
Three First National Plaza, MS 0334
Chicago, IL 60670-0334
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
Pegasus Funds
I
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
MARKET COMMENTARY:
1997 may well be remembered as one of the best years for domestic investing in
recent times. Not only did equities perform well, over 33% total return for the
Standard & Poor's Composite 500 Index ("S&P 500 Index"), but bonds also
provided above average results with the Lehman Brothers Bond Index providing a
9.7% return. Importantly, these results occurred in the lowest inflation
environment that the United States has seen since the 1960's, therefore real
returns, after adjusting for inflation, were about the same as actual returns
and very rewarding by historical experience. The S&P 500, dominated by larger
companies, provided the strongest results, but other indices representing mid-
sized and smaller companies also had good years. The Russell 2500 (mid-sized
companies) returned 24.4% and the Russell 2000 (smaller companies) returned
22.4%. Municipal Bonds provided results very similar to the taxable index noted
above with the Lehman Municipal Bond Index up 9.2%. International investing,
which has lagged domestic results for the last few years, continued that trend
including substantial weakening in the fourth quarter. Morgan Stanley's Europe,
Australia and Far East (EAFE) index returned just 1.8% for the year and the
Salomon Non-U.S. Government Bond Index declined 4.3%.
Equity Highlights
A number of trends continued in 1997. Large capitalization stocks again
provided the best returns. Stocks of financial companies were again among the
strongest groups, while economically sensitive industries such as
transportation, consumer durables and materials and services continued to lag
the overall market. The finance area is worth noting. In 1997 the group as a
whole provided a total return of 48.5%, after generating returns equalling
35.3% in 1996. Two trend reversals did occur in 1997. Technology issues, having
led the market in 1996, were the second weakest group in 1997, advancing 22.9%
versus the overall level of 33.3%. The weakness, caused by the correcting of an
excessive level of enthusiasm was compounded by selected disappointments by
individual companies. Utilities, which were huge laggards in 1996, ran ahead of
the market in 1997 with a total return of 36.8%. The group benefited from
declining interest rates and improvement in the competitive environment for the
regional telephone companies. As the year ended, the trouble in a number of
Asian economies began weighing on the U.S. equity markets, particularly
selected industries. As 1998 unfolds, the Asian markets and economies are
likely to play a key role in our market, as the impact on earnings and investor
confidence becomes clearer.
Fixed Income Highlights
The U.S. bond market closed out the year on a very strong note. Longer bond
yields were driven to their lowest level since 1993 as economic turmoil in the
Asian markets increased the demand for U.S. Treasuries. Bonds also benefitted
from good inflation data at home and the early signs of asset allocation shifts
from the equity markets to fixed income. These flows have been directed more
towards the longer end of the market which has resulted in a dramatic
flattening of the yield curve. The drop in interest rates over the course of
the past year also had a profound effect on the municipal market. Municipal
debt issuance, consisting of new and refunding issues, increased substantially
during 1997, totaling $220 billion. This was the second highest level attained
since 1993, when a record $290 billion was sold. Debt issuance estimates for
1998 indicate a modest slowing to around $203 billion. The decline in interest
rates contributed to both improving credit quality and lowering default rates
in the municipal market, which in turn brought about a dramatic narrowing of
credit spreads all along the yield curve.
Pegasus Family Highlights
In this annual report you will find detailed information about all of your
Pegasus Funds. In summary, 1997 was a good year with all of the funds providing
competitive results, while selected funds distinguished themselves. We are
pleased that our investors fully participated in the overall market's success.
During 1997, we expanded the family to include the Pegasus High Yield Bond
Fund, the Pegasus Municipal Cash Management Fund and the Pegasus Treasury Cash
Management Fund, bringing the family up to 29 funds with year-end assets of
$15.7 billion. In 1998 we don't expect the markets to match 1997 exceptional
results, but we remain optimistic that the favorable economic trends will
provide the backdrop for continued advances. Similarly, we look forward to
another good year for the funds. We believe the Pegasus Funds provide a solid
foundation for meeting your investment goals and we thank you for your
continued confidence in selecting us as your investment advisor.
Sincerely
/s/ George F. Abel
George F. Abel
Chief Investment Officer
First Chicago NBD Investment Management Company
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGED ASSETS FUNDS
- --------------------------------------------------------------------------------
An Interview with Claude Erb
Portfolio Manager
- --------------------------------------------------------------------------------
Q. THE U.S. STOCK MARKET HAD ITS THIRD STRAIGHT YEAR OF RETURNS IN EXCESS OF
20%. HOW DID THE MANAGED ASSETS FUNDS PERFORM?
The Managed Assets Conservative Fund returned 13.34% (I Shares), the Managed
Assets Balanced Fund returned 15.79% (I Shares), and the Managed Assets Growth
Fund returned 17.87% (I Shares) for the year ended December 31, 1997. The Funds
trailed the most commonly used investment benchmark, the S&P 500 index, which
returned 33.35% for the year. However, all the Funds were comfortably ahead of
the Lehman Brothers Aggregate Bond Index which returned 9.66% for the year. The
Funds, by their "balanced" design, should provide returns somewhere between
stocks and bonds.
Q. THE U.S. CONTINUED TO BE THE BEST PERFORMING MAJOR STOCK MARKET IN THE WORLD
LAST YEAR. WHY DO YOU FEEL THIS WAS THE CASE, AND WILL IT CONTINUE?
The U.S. economy and stock market have seen the best of all possible worlds in
1997. We continued to see strong economic growth with, by historical standards,
low inflation. This has allowed corporate profits to continue to rise while
interest rates declined. This combination is ideal for the stock market. In
addition, we have seen a continuation in the strong flows into equity mutual
funds driven by retirement savings from baby boomers.
Q. INTEREST RATES SEEM TO BE AN IMPORTANT COMPONENT OF INVESTMENT RETURNS. WHAT
HAPPENED ON THAT FRONT IN THE U.S. AND AROUND THE WORLD?
Interest rates are indeed crucial to the capital markets. As stated before,
long term interest rates in the U.S. were able to decline through 1997 on
continued low inflation. This, however, was a global phenomenon, with interest
rates in almost all other developed countries falling throughout the year. The
global economy is clearly in flux right now, given developments in Asia, so the
progression of global interest rates will be crucial throughout 1998.
Q. WHERE WERE THE PORTFOLIOS' ASSETS ALLOCATED THROUGHOUT THE YEAR?
Throughout the year, the Funds were underweighted in large capitalization
domestic stocks. In the large capitalization arena, the Funds were overweighted
in value stocks relative to growth stocks. The Funds were also overweighted in
international stocks. In the third quarter, the Funds initiated positions in
the Pegasus High Yield Bond Fund.
Q. WHAT, IN PARTICULAR, DROVE THE FUNDS' PERFORMANCE?
Obviously, underweighting large capitalization stocks hurt relative
performance, as did overweighting international stocks. These macro decisions
were offset, however, by strong asset class performance. For example, the
Funds' underlying investments in mid- and small-capitalization domestic
equities, U.S. investment grade bonds, and international stocks and bonds, all
outperformed their respective benchmarks.
Q. WHAT IS YOUR OUTLOOK FOR THE YEAR AHEAD?
As mentioned before, the U.S. economy and capital markets have been in a nearly
ideal position for the past few years. However, as we start 1998 there are some
uncertainties facing corporate America not seen of late. The turmoil in Asia's
economies is creating a great deal of uncertainty for the earnings prospects of
many American companies. We will need to closely watch the growth of corporate
earnings. On the interest rate side we are seeing the benefit of continued
deflation in the U.S. The yield on long term U.S. government bonds fell from
6.64% to 5.92% in 1997, and should continue to be moderate by historical
standards.
Q. HOW HAVE YOU POSITIONED THE FUNDS TO TAKE ADVANTAGE OF YOUR OUTLOOK?
The Funds continue to maintain an overweight position in international stocks
versus large capitalization domestic equities. Within the domestic equity
sector we think that relative valuations favor value stocks over growth stocks,
and we have positioned the portfolio accordingly. The Funds now have meaningful
positions in domestic high yield and international bonds. The Managed Assets
Funds are designed to provide investors with high risk-adjusted returns, given
their risk tolerance. We feel that the active construction of a broadly
diversified portfolio is suited to a wide number of investors.
2
Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGED ASSETS FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS MANAGED ASSETS CONSERVATIVE FUND, THE
S&P 500 INDEX* AND LEHMAN BROTHERS AGGREGATE BOND INDEX**
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Managed Assets Conservative Fund
Lehman Brothers Aggregate
A-Shares(1) S&P 500(2) Bond Index(2)
<S> <C> <C> <C>
1/23/86 $9,500 $10,000 $10,000
Dec-86 $10,789 $12,293 $11,601
Dec-87 $10,681 $12,936 $11,921
Dec-88 $12,577 $15,079 $12,861
Dec-89 $14,973 $19,846 $14,729
Dec-90 $15,399 $19,232 $16,047
Dec-91 $19,115 $25,079 $16,610
Dec-92 $20,783 $26,986 $19,988
Dec-93 $22,842 $29,701 $21,935
Dec-94 $22,404 $30,092 $21,296
Dec-95 $28,314 $41,366 $25,231
Dec-96 $31,176 $50,883 $26,143
Dec-97 $35,260 $67,853 $28,674
</TABLE>
(1) Includes maximum sales charge of 5.00%
(2) Excludes expenses
(3) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $35,445
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE TEN SINCE
THROUGH 12/31/97 DATE YEAR YEAR YEAR INCEPTION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PEGASUS MANAGED ASSETS CONSERVATIVE FUND
A Shares With 5.00% Load 1/23/86 7.45% 10.02% 12.11% 11.13%(/1/)
S&P 500 Index* 1/23/86 33.35% 20.25% 18.03% 17.40%
Lehman Brothers Aggregate Bond Index** 1/23/86 9.66% 7.48% 9.17% 9.23%
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 11.18%.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
Pegasus Funds
3
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGED ASSETS FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS MANAGED ASSETS CONSERVATIVE FUND, THE
S&P 500 INDEX* AND THE LEHMAN BROTHERS AGGREGATE BOND INDEX**
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Managed Assets Conservative Fund
Lehman Brothers
I-Shares B-Shares(1) S&P 500(2) Aggregate Bond Index(2)
<S> <C> <C> <C> <C>
3/3/95 $10,000 $10,000 $10,000 $10,000
3/95 10,194 10,194 10,295 9,130
6/95 10,961 10,927 11,276 10,706
9/95 11,591 11,535 12,171 10,917
12/95 12,255 12,161 12,904 11,382
3/96 12,547 12,405 13,597 11,179
6/96 12,756 12,578 14,206 11,242
9/96 12,999 12,790 14,645 11,450
12/96 13,533 13,288 15,865 11,793
3/97 13,410 13,136 16,291 11,728
6/97 14,475 14,145 19,133 12,159
9/97 15,150 14,778 20,566 12,565
12/97 15,339 14,621 21,156 12,935
</TABLE>
(1) Includes contingent deferred sales charge of 3.00%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS MANAGED ASSETS CONSERVATIVE FUND
I Shares 3/3/95 13.34% 16.30%
B Shares With 3.00% CDSC 3/3/95 9.37% 14.34%
S&P 500 Index* 3/3/95 33.35% 30.31%
Lehman Brothers Aggregate Bond Index** 3/3/95 9.66% 9.52%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so than an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
Pegasus Funds
4
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGED ASSETS FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS MANAGED ASSETS BALANCED FUND, AND A
60% S&P 500 INDEX*, 40% LEHMAN BROTHERS AGGREGATE BOND INDEX** BLEND
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Managed Assets Balanced Fund A-Shares(1) I-Shares Index Blend(2)
- ------------------------------------ ----------- -------- ---------------
<S> <C> <C> <C>
12/31/93 $ 9,500 $10,000 $10,000
6/94 $ 9,226 $ 9,712 $ 9,643
12/94 $ 9,310 $ 9,800 $ 9,967
6/95 $10,531 $11,085 $11,624
12/95 $11,466 $12,070 $12,922
6/96 $11,957 $12,587 $13,627
12/96 $12,956 $13,644 $14,855
6/97 $14,084 $14,878 $16,846
12/97 $14,936 $15,798 $18,364
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An "A" shareholder investment at the original 4.50% sales charge is
currently valued at $15,014.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS MANAGED ASSETS BALANCED FUND
I Shares 1/1/94 15.79% 12.11%
A Shares With 5.00% Load 1/1/94 9.52% 10.55%(/1/)
B Shares With 4.00% CDSC(3) 8/26/96 10.59% 13.73%
60% S&P 500 Index* and 40% Lehman Brothers Ag-
gregate Bond Index** Blend 1/1/94 23.62% 16.41%(/2/)
</TABLE>
(1) Return for an "A" shareholder who invested at the original 4.50% sales
charge was 10.70%.
(2) Index return annualized, since 8/26/96, was 25.24%.
(3) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so than an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
**The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
Pegasus Funds
5
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGED ASSETS FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS MANAGED ASSETS GROWTH FUND AND AN 80%
S&P 500 INDEX*/ 20% LEHMAN BROTHERS AGGREGATE BOND INDEX** BLEND
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Managed Assets Growth Fund
I-Shares A-Shares(1) B-Shares(2) Index Blend(3)
<S> <C> <C> <C> <C>
12/18/96 $10,000 $ 9,500 $10,000 $10,000
Dec-96 10,099 9,547 9,960 10,115
Mar-97 10,039 9,497 9,874 10,324
Jun-97 11,211 10,600 11,000 11,831
Sep-97 11,868 11,213 11,616 12,624
Dec-97 11,905 10,242 11,223 12,992
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Incudes contingent deferred sales charge of 4.00%.
(3) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS MANAGED ASSETS GROWTH FUND
I Shares 12/18/96 17.87% 18.30%
A Shares With 5.00% Load 12/18/96 11.87% 17.62%
B Shares With 4.00% CDSC 12/18/96 10.69% 11.76%
80% S&P 500 Index* and 20% Lehman
Brothers Aggregate Bond Index** Blend 12/18/96 28.44% 28.88%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
**The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
Pegasus Funds
6
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
An Interview with Chris Gassen and Richard Neumann
Portfolio Managers
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM IN 1997?
The Fund posted a 21.95% return (I shares) in 1997. This was a very strong
return for the portfolio by historical standards, although we have had better
years relative to the market and other equity income managers.
Q. WHAT CAUSED THE PERFORMANCE DIFFERENTIAL LAST YEAR?
It is difficult to pinpoint exactly, although the Fund does maintain a lower
risk profile than the market and many other funds. Our conservative investment
approach and our high dividend yield target lead us to invest in securities
which tend to appreciate less than others in exuberant market environments such
as we witnessed last year. Investors continue to pour capital into the market
in pursuit of easy profit, with professional money managers chasing hot stock
groups to boost short-term performance. Witness the continued increase of
public stock offerings, many of which are flimsy companies at inflated prices.
Reliable measures of success in this market will only come when speculative
activity becomes more subdued and sensible valuations become more important in
determining stock prices.
Q. WHAT CHANGES WERE MADE IN THE FUND LAST YEAR?
Activity in the Fund remained modest in 1997. We sold some positions on price
strength, but there was virtually no activity due to fundamental
disappointments with our investments. Overall, the companies in the Fund are
performing in line with our expectations. However, finding attractively priced
new investments is becoming close to impossible, so we continue to add to some
of our existing holdings, especially ones that haven't participated as fully in
the recent market surge. Among the roster of our holdings are some top-notch
managements with whom we are very comfortable being business partners. Over the
longer-term we think our patience with these stocks will be rewarded.
Q. WHAT'S NEXT FOR 1998?
The prevailing view among most market pundits is that stock prices will
continue to do well because the U.S. economy will remain strong, although
prices will probably not rise as fast as last year. However, market forecasts
are not always accurate. Therefore, our view is more simple, forget the broad
market forecasts and look for attractively priced stocks of financially sound
but out-of-favor companies. Of course these days this is much easier said than
done. As stock prices continue to inflate, good investments become increasingly
scarce. We will obviously be challenged this year to maintain our conservative
posture with sensibly priced investments.
Q. YOU SEEM TO PAINT A RATHER BLEAK PICTURE FOR THE MARKET. WHY SHOULD I REMAIN
INVESTED IN EQUITIES IF I BELIEVE YOU ARE CORRECT?
No one (even us) has demonstrated the ability to accurately predict short-term
market trends. Over the longer-term, equities historically have tended to
outperform other investments such as bonds or cash instruments, although they
are more volatile. Therefore, most investment advisors suggest that some equity
exposure be maintained at all times. However, if one believes that the current
short-term outlook is for a volatile and somewhat shaky market environment,
then a relatively lower-risk equity fund which seeks to pay out above average
current income like the Pegasus Equity Income Fund may be a sensible place to
maintain equity exposure.
Pegasus Funds
7
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
EQUITY INCOME FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS EQUITY INCOME FUND AND THE
RUSSELL 1000 VALUE INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Equity Income Fund
Russell 1000
A-Shares(1) B-Shares(2) I-Shares Value Index(3)
<S> <C> <C> <C> <C>
1/27/95 $ 9,500 $10,000 $10,000 $10,000
Jun-95 $10,692 $11,219 $11,264 $11,597
Dec-95 $12,329 $12,894 $13,027 $13,441
Jun-96 $13,076 $13,622 $13,846 $14,454
Dec-96 $14,706 $15,250 $15,576 $16,358
Jun-97 $16,210 $16,754 $17,196 $19,250
Dec-97 $17,878 $17,911 $18,995 $22,113
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Includes contingent deferred sales charge of 3.00%.
(3) Excludes expenses.
(4) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $17,972.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS EQUITY INCOME FUND
I Shares 1/27/95 21.95% 24.49%
A Shares With 5.00% Load 1/27/95 15.49% 21.94%(/1/)
B Shares With 3.00% CDSC 1/27/95 17.78% 22.48%
Russell 1000 Value Index* 1/27/95 35.18% 31.12%
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 22.15%.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 1000 Value Index is an unmanaged index generally representative
of the largest 1000 companies with a greater-than-average value orientation.
Pegasus Funds
8
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
GROWTH FUND
- --------------------------------------------------------------------------------
An Interview with Jeffrey Beard
Portfolio Manager
- --------------------------------------------------------------------------------
Q. WE HAVE READ ELSEWHERE HOW 1997 WAS ANOTHER BLOCKBUSTER YEAR IN THE EQUITY
MARKET, BUT WHAT HAPPENED IN THE FOURTH QUARTER?
Equity investors in the fourth quarter turned defensive in response to the
uncertainties growing out of the turmoil in the Asian countries. Although the
market experienced its first real correction in seven years, it did manage at
least a partial comeback as stocks, which can demonstrate consistent results,
including those in the consumer staples, healthcare, and financial sectors,
were bid upward. However, performing surprisingly well in this market
environment were stocks offering some type of fixed return such as former
laggards in the telecommunications and utilities sectors. Finishing up with a
2.9% return for the quarter, the S&P 500 Index capped off a third blockbuster
year in a row with a 33.4% total return.
Q. THIS DOES NOT SOUND LIKE A POSITIVE BACKDROP FOR GROWTH INVESTORS. HOW DID
THE GROWTH FUND PERFORM?
This type of market backdrop is not particularly conducive to growth investing,
in general, as evidenced by the negative 1.1% average return for the Lipper
Growth Universe of managers, nor is it friendly toward the general equity fund
manager which averaged negative 1.6% according to Lipper; yet the Fund was able
to hold its own in this market, turning in positive 2% total return before fee
adjustment, and 1.8% afterward. For the year, the Fund provided a healthy
return of 27.10%. This compares favorably with the Lipper Growth Universe
average return of 25.3%, as well as the 24.4% return generated by the average
general equity fund.
Q. GRANTED, THE FUND PERFORMED WELL COMPARED TO OTHER GROWTH MANAGERS.
NONETHELESS, HELP US BETTER UNDERSTAND THE DYNAMICS WHICH CONTRIBUTED TOWARD
THE FUND LAGGING THE S&P 500 FOR THE QUARTER AND THE LARGE CAPITALIZATION
BENCHMARK, THE STANDARD AND POOR'S COMPOSITE INDEX.
Sub-market performance for the quarter is largely attributable to two factors:
a large underexposure to the communication services sector and the large
exposure to technology stocks. The former are traditionally underweighted in
growth funds due to unexciting growth prospects and the latter bore the brunt
of the market's retreat in the correction, but did not rebound as much. In
keeping with the market theme for the quarter, the best performing stocks in
the Fund were largely domestic, highly consistent earners. Norwest was up 27%,
having benefited from declining interest rates, as well. Pfizer received
preliminary approval for a new potential blockbuster drug sooner than
anticipated and returned 24%. Rounding out the top five were Walt Disney
(+23%), Walgreens (+23%), and Illinois Tool Works (+21%). Technology stocks
dominated the worst performing stocks in the Fund. Preannounced earnings were
responsible for very disappointing returns from Silicon Graphics and Cabletron
Systems, both of which were down 53%, and Altera which was down 35%. Management
guidance to reduce near-term expectations impacted Fluor (-30%), and
uncertainty surrounding Asia's influence on demand for personal computers hurt
Intel (-24%).
Q. AND WHAT ABOUT FOR THE YEAR; WHAT WERE THE WINNERS AND THE LOSERS IN THE
FUND?
The best performance came from the independent power producer, AES Corp., which
doubled in value during 1997, in large part due to several contracts signed
throughout the year which have added to the visibility of earnings over the
next two to three years, or longer. Norwest Corp. returned 82% and benefited
from solid fundamental execution within the consistently strong financial
sector. Pfizer, which also advanced 82%, has consistently hit expectations and
has one of the richest pipelines of new products, contributing to clearly
visible earnings growth for the foreseeable future. State Street Corp., up 82%
for the year, exceeded expectations, driven by growth in assets and associated
higher fee income. Rounding out the top five was Home Depot, up 77%. Home Depot
benefited from the consolidation within the do-it-yourself retailing industry
coupled with very favorable consumer demand for its products and services. The
negative side of the ledger was dominated by technology stocks, all of which
paid the price for missing expectations and most of which suffered from
concerns originating from soft demand, perceived or real, from international
customers. Specifically, Cabletron Systems declined 53%, Silicon Graphics
declined 52%, Altera dropped 35%, and First Data Corp. dropped 20%. Fluor was
influenced by Asian dislocations disrupting the supply/demand relationship for
global engineering and construction services following a period of aggressive
expansion for the company. Its stock declined 40%.
Q. CAN YOU COMMENT ON ACTIVITY IN THE FUND GIVEN THE ROBUST MARKET ENVIRONMENT?
The turnover ratio for the Growth Fund was below average at 22% using the SEC's
definition of turnover. The turnover rate for the Fund is expected to be in the
range of 25% to 35% over longer time periods.
Q. WHAT IS YOUR OUTLOOK FOR THE NEXT 12 MONTHS, AND GIVEN THIS OUTLOOK, HOW IS
THE FUND POSITIONED?
We believe the economy will continue to grow, although the head winds created
by increased competition from cheap imports will pressure revenue growth and
increasing wage demands will squeeze margins as well, pulling corporate
earnings growth expectations downward. As earnings growth does in fact slow,
stock selection becomes even more paramount, and we believe that investors will
focus on an increasingly narrow selection of large-capitalization, consistent
growth equities, driving valuation of these successful stocks even higher. The
Growth Fund's approach to investing is particularly well suited to this
environment, emphasizing consistent earnings growth supported by strong, unit-
driven revenue growth.
Pegasus Funds
9
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
GROWTH FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS GROWTH FUND, AND THE
RUSSELL 1000 GROWTH INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Growth Fund A-Shares(1) B-Shares(2) I-Shares Russell 1000 Growth Index(5)
<S> <C> <C> <C> <C> <C>
1/27/95 $9,500 $10,000 $10,000 $10,000
6/95 $10,749 $11,269 $11,317 $11,879
12/95 $12,347 $12,915 $13,038 $13,548
6/96 $13,423 $13,974 $14,200 $15,235
12/96 $14,830 $15,374 $15,692 $16,737
6/97 $17,231 $17,810 $18,260 $20,009
12/97 $18,796 $18,858 $19,946 $21,841
</TABLE>
(1) Includes max imum sales load of 5.00%.
(2) Includes con tingent deferred sales charge of 3.00%.
(3) Excludes exp enses.
(4) An "A' Share holder investment at the original 4.50% sales charge is
currently valued at $18,897.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS GROWTH FUND
I Shares 1/27/95 27.10% 26.58%
A Shares With 5.00% Load 1/27/95 20.42% 24.05%(1)
B Shares With 3.00% CDSC 1/27/95 22.90% 24.62%
Russell 1000 Growth Index* 1/27/95 30.49% 30.41%
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 24.27%.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 1000 Growth Index is an unmanaged index generally representative
of the largest 1000 companies with a greater-than-average growth orientation.
Pegasus Funds
10
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MID-CAP OPPORTUNITY FUND AND SMALL-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
An Interview with Ronald Doyle and Joe Gatz
Portfolio Managers
- --------------------------------------------------------------------------------
Q: HOW DID THE MID-CAP OPPORTUNITY FUND AND SMALL-CAP OPPORTUNITY FUND PERFORM
IN 1997?
Both Funds had excellent performance, exceeding both their respective mid-cap
and small-cap market indicies, and the universe averages of other mid-cap and
small-cap funds. The Mid-Cap Opportunity Fund returned 27.9% (I shares) for the
twelve months ended December 31, 1997, compared to the 19.6% return for the
Lipper Mid-Cap Universe average and the 24.4% return of the Russell 2500 Index.
The Small-Cap Opportunity Fund returned 30.6% (I Shares) for the twelve month
period compared to the 20.8% return for the Lipper Small Company Growth Average
and the Russell 2000 return of 22.4%.
Q: TO WHAT DO YOU ATTRIBUTE THIS STRONG PERFORMANCE?
Both Funds' favorable returns versus their benchmarks can be attributed to good
fundamental performance of the holdings in the portfolios, with relatively few
negative "surprises" throughout the year. Our efforts to select attractive
stocks were successful in almost all industry sectors, with the strongest
contributions from financial services and health care. In addition, both Funds
maintained attractive valuation profiles versus many other small- and mid-cap
funds.
Q: LARGE COMPANY STOCKS HAVE PERFORMED BETTER THAN SMALLER COMPANY STOCKS FOR
THE LAST FEW YEARS. HOW DID MID-SIZED AND SMALL COMPANY STOCKS COMPARE TO THE
S&P 500 LAST YEAR?
Indeed, the 33.4% return of the S&P 500 Index once again exceeded almost all
other market indices, including the mid-cap and small-cap benchmarks. During
the first half of 1997, record cash flows into the equity market were absorbed
by the liquidity offered in larger company stocks and large-cap dominated index
funds. Although small- and mid-cap stocks rallied in the third quarter of the
year, investors returned to the perceived safety and liquidity of large-cap
stocks in reaction to the uncertainty generated by economic turmoil in
Southeast Asia.
Q: WHAT IS THE OUTLOOK FOR MID-CAP AND SMALL-CAP INVESTMENTS IN 1998?
Although disruption in certain international economies lends uncertainty to the
overall outlook for U.S. equities, we remain optimistic regarding the prospects
for mid-cap and small-cap stocks. Relative to the large-cap multinational
companies represented in the S&P 500 Index, small- and mid-sized companies are
more domesticly oriented and are generally less affected by international
economies and currency fluctuations. In addition, we believe near term earnings
growth for small companies is expected to exceed that of larger companies.
Finally, the valuation of mid- and small-cap stocks appears somewhat more
attractive after the sector has underperformed larger company stocks for the
last three years.
Q: GIVEN THIS OUTLOOK, HOW ARE THE FUNDS POSITIONED?
Both the Mid-Cap Opportunity Fund and the Small-Cap Opportunity Fund seek to
invest in proven growth companies selling at reasonable prices. We require the
companies we invest in have a distinct competitive advantage that allows them
to maintain above average growth and profitability. We prefer companies that
generate strong cash flow and have solid financial structures. We also prefer
companies whose managements have their financial interests aligned with
shareholders. In addition, we pay close attention to the valuations of our
holdings relative to their underlying fundamental prospects. These strategies
have served us well in the past, and we are committed to maintaining them in
the future.
Small capitalization equity Funds typically carry additional risks and
historically, their stocks have experienced a greater degree of market
volatility than stocks on average.
Pegasus Funds
11
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MID-CAP OPPORTUNITY FUND AND SMALL-CAP OPPORTUNITY FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS MID-CAP OPPORTUNITY FUND, AND THE
RUSSELL 2500 INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Mid-Cap
Opportunity Fund A-Shares(1) I-Shares Russell 2500 Index(2)
<S> <C> <C> <C>
6/1/91 $10,000 $10,000
12/91 $10,523 $11,204
5/1/92 $ 9,500 $10,995 $11,638
12/92 $11,208 $13,107 $13,017
12/93 $13,899 $16,254 $15,170
12/94 $13,844 $15,724 $15,026
12/95 $16,102 $18,830 $19,787
12/96 $20,113 $23,544 $23,553
12/97 $25,657 $30,116 $29,290
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $25,792.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEAR INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS MID-CAP OPPORTUNITY FUND
I Shares 6/1/91 27.91% 18.10% 18.22%
A Shares With 5.00% Load 5/1/92 21.19% 16.81% 18.08%(/1/)
B Shares With 4.00% CDSC (3) 9/23/96 23.10% N/A 25.25%
Russell 2500 Index* 6/1/91 24.36% 17.59% 17.72%(/2/)
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 18.19%.
(2) Index return since 9/23/96 was 24.85%.
(3) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so than an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 2500 Index is an unmanaged index generally representative of the
small-to-medium-small stock market.
Pegasus Funds
12
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MID-CAP OPPORTUNITY FUND AND SMALL-CAP OPPORTUNITY FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS SMALL-CAP OPPORTUNITY FUND AND THE
RUSSELL 2000 INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Small-Cap
Opporunity Fund A-Shares(1) B-Shares(2) I-Shares Russell 2000 Index(3)
<S> <C> <C> <C> <C>
1/27/95 $9,500 $10,000 $10,000 $10,000
6/95 $10,113 $10,600 $10,640 $11,539
12/95 $11,856 $12,376 $12,486 $12,954
6/96 $12,750 $13,274 $13,460 $14,296
12/96 $14,771 $15,398 $15,713 $15,090
6/97 $17,000 $17,647 $18,109 $16,534
12/97 $19,226 $19,389 $20,522 $18,358
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Includes contingent deferred sales charge of 3.00%.
(3) Excludes expenses.
(4) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $19,327.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS SMALL-CAP OPPORTUNITY FUND
I Shares 1/27/95 30.60% 27.81%
A Shares with 5.00% Load 1/27/95 23.66% 25.00%(/1/)
B Shares with 3.00% CDSC 1/27/95 26.17% 25.80%
Russell 2000 Index* 1/27/95 22.36% 22.83%
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50 sales
charge was 25.22%.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 2000 Index is an unmanaged index generally representative of the
small-cap equity market.
Pegasus Funds
13
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRINSIC VALUE FUND
- --------------------------------------------------------------------------------
An Interview with Chris Gassen and Richard Neumann
Portfolio Managers
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM?
We ended 1997 with a 25.25% return (I shares), a very strong year for absolute
performance. However, it was also a good year for the general equity market
with the S & P 500 Index up an astounding 33.4 percent, while the Lipper Growth
& Income Index return was closer to the Fund's return at 27.1%.
Q. DESPITE THE GOOD ABSOLUTE RETURN, YOU FELL SLIGHTLY BEHIND THE S&P 500
INDEX. WHY?
In exuberant market environments such as last year, more conservatively
invested funds such as the Intrinsic Value Fund typically lag. Over longer
periods we have achieved more competitive returns and have done so with less
risk than the market.
Q. HOW DO YOU MEASURE RISK?
Many investors use volatility statistics (such as beta and standard deviation)
to measure risk; the more volatile the return, the riskier the asset. In
general, investors demand higher returns when they incur greater risk.
Q. YOU SAY THAT THE FUND HAS BEEN LESS RISKY THAN THE OVERALL MARKET. WHAT
ABOUT RISK ADJUSTED RETURNS?
A risk adjusted return takes a fund's risk into account when evaluating
performance. According to outside sources like Morningstar and Value Line, the
Intrinsic Value Fund's performance is above average when considering that our
risk has been very low relative to other funds in the same category.
Q. WHERE IS THE MARKET AND THE FUND HEADED IN 1998?
The market has looked expensive to us for some time, and 1997 did nothing to
change that outlook. We see a market environment driven by forces of momentum
and speculation, so the connection between current stock prices and the
business fundamentals of underlying companies is not often apparent to us.
Thus, its difficult to find attractively valued stocks. We believe that this
speculative environment will eventually cool off and prices will return to more
sensible values. We think the Fund is positioned to give investors a less bumpy
ride in the interim, although in such a volatile environment anything can
happen in the short run.
Q. A LESS BUMPY RIDE, BUT A BUMPY RIDE NONETHELESS?
Unfortunately, one cannot be invested in equities without expecting ups and
downs, no matter how conservative the portfolio. However, it is precisely for
this reason that equities have outperformed other asset classes over the longer
term. Remember that higher returns should accompany higher risk. Historically,
the Intrinsic Value Fund has earned attractive returns with less volatility
than the market. This is clearly our goal in the years ahead.
14
Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRINSIC VALUE FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS INTRINSIC VALUE FUND AND THE
S&P 500 INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Intrinsic
Value Fund A-Shares(1) I-Shares S&P 500(2) B-Shares(3)
<S> <C> <C> <C> <C>
6/1/91 $10,000 $10,000
12/91 $10,152 $10,902
5/1/92 $ 9,500 $10,919 $10,627
12/92 $ 9,930 $11,629 $11,731
12/93 $11,391 $13,340 $12,911
12/94 $11,323 $13,260 $13,080
12/95 $14,083 $16,492 $17,991
12/96 $17,434 $20,449 $22,119
12/97 $21,798 $25,613 $29,496
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $21,913.
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEAR INCEPTION
- -----------------------------------------------------------------------------------
PEGASUS INTRINSIC VALUE FUND
I Shares 6/1/91 25.25% 17.11% 15.35%
A Shares With 5.00% Load 5/1/92 18.79% 15.83% 14.73%(/1/)
B Shares With 4.00% CDSC(3) 9/23/96 20.24% N/A 23.41%
S&P 500 Index* 6/1/91 33.35% 20.25% 17.84%(/2/)
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.5% sales
charge was 14.84%.
(2) Index return since 9/23/96 was 30.68%.
(3) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
Pegasus Funds
15
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
GROWTH AND VALUE FUND
- --------------------------------------------------------------------------------
An Interview with Gary L. Konsler
Portfolio Manager
- --------------------------------------------------------------------------------
Q. CAN YOU PUT THE STOCK MARKET'S RETURN FOR 1997 INTO PERSPECTIVE FOR ME?
The Dow Jones Industrial Average (Dow) posted another record year generating a
25% return. The S&P 500 Index did even better earning a 33% return. Both
indices have now recorded annual returns in excess of 20% for three years
duration. The Dow has been in existence for over 100 years, the S&P 500 over 69
years. Successive 20%, three-year returns have never been achieved by either.
The three-year cumulative returns for the Dow and the S&P are over 100%, the
second best 36-month period. The historical longer term return for stocks
averages about 10% to 11% per year.
Q. HOW DID THE PEGASUS GROWTH AND VALUE FUND PERFORM DURING 1997?
The Fund returned over 28% (I shares) in 1997. This compares favorably with the
27% return reported by the Lipper Growth and Income Universe Average of mutual
funds as well as the 24% return for General Equity Funds invested in
diversified U.S. stocks.
Q. CONSIDERING THE SIZE OF THESE NUMBERS, IS THIS A NEW ERA OF INVESTING?
It is still too early to say with total conviction. However, we can say the
markets have benefited from a remarkable combination of economic events.
Despite monetary upheavals in Asia, the economy is expanding at a 3% rate with
more consistency than at any time in over a decade. At the same time, inflation
is at levels not seen in over three decades. Concurrently, bond yields are
nearing 30-year lows. Consumer confidence is at a 28-year high. The Federal
budget deficit is shrinking. Corporate profits advanced for a sixth year. (A
seventh year would be a record.) This environment has been described as the
Goldilocks economy, nirvana, and the best of all possible worlds. As the
economy approaches the beginning of its eighth year of expansion (the third
longest in U.S. history), the question remains, how long will the stock-market-
benefiting, economic expansion continue?
Q. WHICH STOCKS PERFORMED PARTICULARLY WELL IN THE FUND AND WHICH DID NOT MEET
YOUR EXPECTATIONS?
The best performing stocks were in the healthcare arena, Schering-Plough and
Bristol-Myers Squibb, each representing 3 to 4% of the Fund's portfolio.
Finance was also strong, led by Norwest (the 12th largest bank). Schlumberger,
the premier oil service firm, was additive. In the newspaper area, both Gannett
and the Washington Post boosted returns. These five stocks returned between 47%
and 94% for the year. During 1997, investors once again severely punished any
company that reported bad news or warned of potential problems on the horizon.
That was the common threat that tied together the disappointing holdings for
the year, e.g., York (heating and air conditioning), First Data (credit card
processing), The Pep Boys (auto parts sales and service), Russell (active
apparel) and Boeing (aerospace).
Q. WHAT WAS THE MAGNITUDE OF PURCHASE AND SALE ACTIVITY DURING THE YEAR?
Turnover for the year was about average at 29%.
Q. WHAT IS THE FUND'S POSITION REGARDING CASH HOLDINGS IN THE FUND?
The Fund does not engage in market timing or asset allocation strategies. Its
goal is to remain as fully invested in common stocks as practical. To further
that goal, late in the quarter, the Fund initiated a strategy of investing
liquidity in S&P 500 Index futures. This will be likely to have the effect of
"equitizing" cash operating reserves.
Q. IN ADDITION TO THE ECONOMIC UNDERPINNINGS MENTIONED ABOVE, ARE THERE ANY
OTHER ISSUES THAT COULD HAVE A MAJOR IMPACT ON THE STOCK MARKET?
During 1997, the stock market was unusually volatile. The S&P 500 rose or fell
more than 1% on nearly one-third of the trading days in 1997, double the
volatility of 1996, triple that of 1995. This was only the fourth time in two
decades the market was so volatile. In addition, at year end, the S&P 500 was
trading at 19 times 1998 consensus earnings estimates, a level not seen in over
20 years. Thus, the market does not appear to expect any disappointments.
Naturally, with expectations so high, volatility will likely continue in 1998.
Q. HOW DO YOU INVEST DURING SUCH TIMES?
Such an environment, we believe, calls for the core of an investor's equity
holdings to be invested in a diversified portfolio of high quality, financially
sound, blue chip stocks selling at attractive prices. That is how the Pegasus
Growth and Value Fund is, and plans to remain, invested.
16 Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
GROWTH AND VALUE FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS GROWTH AND VALUE FUND AND THE
S&P 500 INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Growth & Value Fund A Shares(1) I-Shares S&P 500(2)
- --------------------------- ----------- -------- ----------
<S> <C> <C> <C>
6/1/91 $10,000 $10,000
12/91 $10,000 $10,902
5/1/92 $9,500 $10,170 $10,627
12/92 $10,015 $11,000 $11,731
12/93 $11,397 $12,512 $12,911
12/94 $11,459 $12,580 $13,080
12/95 $14,670 $16,105 $17,991
12/96 $17,493 $19,221 $22,119
12/97 $22,355 $24,631 $29,496
</TABLE>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $22,473.
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEAR INCEPTION
- -----------------------------------------------------------------------------------
PEGASUS GROWTH AND VALUE FUND
I Shares 6/1/91 28.15% 17.50% 14.67%
A Shares With 5.00% Load 5/1/92 21.41% 16.22% 15.24%(/1/)
B Shares With 4.00% CDSC(3) 9/23/96 22.90% N/A 23.36%
S&P 500 Index* 6/1/91 33.35% 20.25% 17.84%(/2/)
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 15.35%.
(2) Index return since 9/23/96 was 30.68%.
(3) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
*The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
Pegasus Funds
17
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
EQUITY INDEX FUND
- --------------------------------------------------------------------------------
An Interview with Richard Neumann
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE EQUITY INDEX FUND PERFORM LAST YEAR?
The Fund returned 32.97% (I shares) last year compared with a 33.35% return for
the S&P 500 Index.
Q. WHAT ACCOUNTED FOR THE DIFFERENCE BETWEEN THE FUND'S RETURN AND THAT OF THE
MARKET?
Last year, the entire difference was more than accounted for by management
fees. If fees are excluded, the Fund's return would have been slightly higher
than the Index. In addition to management fees, we would expect small
deviations to occur due to transaction costs and small differentials between
securities' weights in the Fund and in the S&P 500 Index. Over time we would
expect only a small negative variance from the underlying performance of the
S&P 500 Index.
Q. WHAT HAS BEEN THE LONGER-TERM RECORD FOR THE FUND?
For the past five years, the Fund's compound annual return totals 20.21% versus
20.25% for the market.
18
Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
EQUITY INDEX FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS EQUITY INDEX FUND AND THE
S&P 500 INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Equity Index Fund
A-Shares(1) I-Shares S&P 500(2)
<S> <C> <C> <C>
7/10/92 $ 9,700 $10,000 $10,000
Dec-92 $10,331 $10,648 $10,657
Dec-93 $11,340 $11,688 $11,736
Dec-94 $11,456 $11,807 $11,891
Dec-95 $15,735 $16,219 $16,355
Dec-96 $19,273 $19,880 $20,108
Dec-97 $25,573 $26,434 $26,814
</TABLE>
(1) Includes maximum sales charge of 3.00%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATES YEAR YEAR INCEPTION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS EQUITY INDEX FUND
I Shares 7/10/92 32.97% 19.94% 19.41%
A Shares With 3.00% Load 7/10/92 28.71% 19.15% 18.69%
B Shares With 3.00% CDSC(2) 9/23/96 28.71% N/A 29.78%
S&P 500 Index* 7/10/92 33.35% 20.25% 19.72%(/1/)
</TABLE>
(1) Index return since 9/23/96 was 30.68%.
(2) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
*The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
Pegasus Funds
19
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
An Interview with Richard Kost
Portfolio Manager
- --------------------------------------------------------------------------------
WHAT IS THE NATURE OF THE FUND AND ITS OBJECTIVES?
The Fund is an equity mutual fund which invests primarily in equity securities
of non-U.S. companies. The Fund's objective is to achieve long-term capital
appreciation. The Fund seeks to achieve this objective by emphasizing active
country selection involving global economic, financial, and political
assessments together with valuation analysis of selected countries' securities
markets. The Fund may exhibit more volatility than the U.S. equity market in
general.
HOW DID THE FUND DO IN 1997?
For the year ended December 31, 1997, the Fund returned 4.0% (I Shares). The
Fund's return outperformed the Morgan Stanley Capital International EAFE Index
(EAFE Index) return of 1.8%. The EAFE Index is a market value weighted index of
about 1,100 equity securities issued by non-U.S. companies with a total market
value of approximately US $5.9 trillion. This index is not subject to the
expenses of a mutual fund. The Fund outperformed the EAFE Index primarily due
to its underweighting of equities in Japan and overweighting of equities in
Latin America.
WHAT WAS THE INVESTMENT ENVIRONMENT THAT THE FUND OPERATED IN?
International equity markets appreciated during 1997 as continued economic
growth and modest inflationary pressures resulted in lower interest rates. The
Morgan Stanley Capital International EAFE Index returned 1.8% in U.S. dollar
terms for the year. European equity markets advanced 23.8% in U.S. dollar terms
on good earnings gains and lower interest rates. The Japanese stock market
lagged with a U.S. dollar return of -23.7%. This stock market declined during
the year on concerns about the sluggish economy, and investor uncertainty about
the competitive position of Japanese banks in a less regulated environment. The
MSCI Pacific ex-Japan index declined 31.0%, led by a return of -68.3% in
Malaysia. The Asian turmoil appears to reflect uncertainties about the region's
financial systems and political instability in several countries governments.
Latin American equity markets advanced 31.6% (MSCI Latin America free) as
economic growth accelerated in a more stable environment.
WHAT IS YOUR LONG TERM OUTLOOK FOR INTERNATIONAL EQUITY INVESTING?
Over the long term, international equities have historically provided returns
superior to U.S. large capitalization stocks, although at a higher level of
volatility. We continue to recommend that long-term investors have a portion of
their assets invested internationally to capture the benefits of portfolio
diversification and potential capital appreciation.
GIVEN YOUR OUTLOOK HOW HAVE YOU ALLOCATED THE FUND'S ASSETS?
At year end, 60% of the Fund's assets were invested in Europe. Approximately
19% were invested in the Far East, of which 13% were in Japan. Investments in
Latin American countries represented 16% of assets and cash equivalents
accounted for 5%.*
* The portfolio composition is subject to change.
International investing is subject to certain factors such as currency exchange
rate volatility, possible political, social or economic instability, foreign
taxation and differences in auditing and other financial standards.
20
Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS INTERNATIONAL EQUITY FUND AND THE
MSCI EAFE INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus International Equity Fund
A-SHARES(1) I-SHARES EAFE(2)
<S> <C> <C> <C>
12/3/94 $9,500 $10,000 $10,000
Dec-94 $9,504 $10,005 $10,012
Mar-95 $9,665 $10,174 $10,198
Jun-95 $10,004 $10,531 $10,273
Sep-95 $10,339 $10,883 $10,701
Dec-95 $10,595 $11,153 $11,134
Mar-96 $10,896 $11,470 $11,456
Jun-96 $11,102 $11,687 $11,637
8/26/96
Sep-96 $11,099 $11,710 $11,623
Dec-96 $11,390 $12,021 $11,808
Mar-97 $11,280 $11,913 $11,623
Jun-97 $12,524 $13,238 $13,130
Sep-97 $12,777 $13,513 $13,037
Dec-97 $11,810 $12,499 $12,016
</TABLE>
(1) Includes maximum sales charges of 5.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment at the original 4.50% sales charge is
currently valued at $11,872.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS INTERNATIONAL EQUITY FUND
I Shares 12/3/94 3.98% 7.51%
A Shares With 5.00% Load 12/3/94 (1.49)% 5.55%(/1/)
B Shares With 4.00% CDSC (3) 8/26/96 (.88)% 1.35%
MSCI EAFE Index* 12/3/94 1.77% 6.84%(/2/)
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 5.73%.
(2) Index return since 8/26/96 was 3.00%.
(3) The performance of the B Shares will be less than the performance Shares
for the I-Shares due to the differences in loads and fees paid by
Shareholders investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The MSCI EAFE Index is an unmanaged index generally representative of the
foreign equity market as a whole.
Pegasus Funds
21
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
BOND AND INTERMEDIATE BOND FUNDS
- --------------------------------------------------------------------------------
An Interview with Doug Swanson
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE BOND AND INTERMEDIATE BOND FUNDS PERFORM IN 1997?
With rates generally moving lower in 1997 both Funds had another great year
relative to their benchmarks and peers. For the Bond Fund's fiscal year ended
December 31, 1997 the Fund provided a total return of 9.97% (I Shares) versus
9.65% for its Index the Lehman Brothers Aggregate Bond Index. This return also
placed the Fund fourth out of 123 in its Lipper category (Intermediate U.S.
Government) for the year. For the five years ended December 31, 1997 the Fund
placed first out of 49 funds in the same Lipper category. For the Intermediate
Bond Fund's fiscal year ended December 31, 1997 the Fund provided a total
return of 8.37% (I Shares) versus 7.87% for its Index the Lehman Intermediate
Government/Corporate Index. This placed the Fund first out of 92 in its Lipper
category (Short-Intermediate U.S. Government). For the five years ended
December 31, 1997 the Fund placed first out of 49 funds in the same Lipper
category.
Q. WHAT WERE THE PRIMARY REASONS FOR THESE FUNDS' GOOD PERFORMANCE?
Similarly to 1996, our overweighting in mortgage backed securities was a
positive, as this sector outperformed most of the year. Also, our security
selection within this sector was excellent as many of our individual
(Collateralized Mortgage Obligations (CMOs)) holdings outperformed generic
securities.
Q. HOW DID THE CRISIS IN THE ASIAN FINANCIAL MARKETS AFFECT THE FUNDS?
The biggest effect was to create a "flight to quality" that extended the rally
in U.S. fixed income markets. This clearly had a positive effect on the Funds'
absolute returns. The Funds had no direct exposure to Asian creditors, many of
which had their ratings slide to below investment grade. The flight to quality
did result in returns on corporate bonds significantly lagging that of similar
duration U.S. Treasuries. The Funds' underweighting in this sector versus their
respective benchmark index had a positive impact on performance in the fourth
quarter.
Q. WHAT ARE THE FUNDS' CURRENT DURATION AND WHY IS THAT IMPORTANT?
As of December 31, 1997, the Bond Fund had a duration of 4.4 versus 4.6 for its
benchmark index and the Intermediate Fund had a duration of 3.2 versus 3.4 for
its Index. This is important because duration is a measure of interest rate
risk of a portfolio or security. The higher the duration the higher the
interest rate risk.
Q. WHAT ARE THE FUNDS' SECTOR ALLOCATIONS?
At the end of 1997 the Bond Fund held 40% in U.S. Treasuries, 44% in Mortgage
Backed Securities, 11% in Asset Backed Securities, 4% in Corporates and 1% in
money market funds. Also, the Fund held 96% in AAA securities. For the
Intermediate Bond Fund, 41% was invested in U.S. Treasuries, 39% in mortgage
backed securities, 18% in asset backed securities and 2% in Corporates. Also,
97% of the assets in the Fund were rated AAA.
Q. WHAT ARE SOME OF YOUR STRATEGIES FOR 1998?
We will continue to keep the duration of the Funds' similar to that of their
respective benchmark index. Our long-term view on the bond market remains
positive, although we believe we will remain within a range during most of
1998. We have increased our holdings of short duration AAA rated asset-backed
securities and believe these will outperform similar duration Treasuries.
Although the mortgage-backed sector is not as undervalued as it was at the end
of 1996, we think there are still many opportunities in this sector. Finally,
we will continue to stress higher quality securities.
Neither the Lehman Aggregate Bond Index or Intermediate Government/Corporate
Bond Index is subject to the expenses of a mutual fund.
22
Pegasus Funds
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
BOND AND INTERMEDIATE BOND FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS BOND FUND AND THE LEHMAN BROTHERS
AGGREGATE BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Bond Fund
Lehman Brothers
I-Shares A Shares (1) Aggregate Bond Index (2)
<S> <C> <C> <C>
5/31/91
6/1/91 10000 10000
12/31/91 11070 11098
6/30/92 11332 9851 11398
12/31/92 11796 10253 11919
6/30/93 12794 11121 12742
12/31/93 13139 11422 13082
6/30/94 12486 10854 12576
12/31/94 12220 10623 12700
6/30/95 14022 12189 14154
12/31/95 15122 13145 15046
6/30/96 14964 13007 14864
12/31/96 15890 13799 15593
6/30/97 16402 14221 16075
12/31/97 17474 15131 17098
</TABLE>
(1) Includes maximum sales charge of 4.50%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEARS INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS BOND FUND
I Shares -- Net of Fees 6/1/91 9.97% 8.18 8.84%
A Shares With 4.50% Load 5/1/92 4.72% 7.10 7.58%
B Shares With 4.00% CDSC(1) 8/26/96 4.91% N/A 7.42%
Lehman Brothers Aggregate Bond Index* 6/1/91 9.65% 7.48 8.49%
</TABLE>
(1) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
Pegasus Funds
23
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
BOND AND INTERMEDIATE BOND FUNDS -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS INTERMEDIATE BOND FUND AND LEHMAN
BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX*
[LINE GRAPH APPEARS HERE]
(TABLE TO COME)
(1) Includes sales charge of 3.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment with the original 4.50% sales charge is
currently valued at $14,065.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEARS INCEPTION
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS INTERMEDIATE BOND FUND
I Shares -- Net of Fees 6/1/91 8.37% 6.82% 7.57%
A Shares With 3.00% Load 5/1/92 4.80% 6.08% 6.49%(1)
B Shares With 3.00% CDSC(2) 9/23/96 4.32% N/A 6.29%
Lehman Brothers Intermediate
Government/Corporate Bond Index* 6/1/91 7.87% 6.66% 7.67%
</TABLE>
(1) Return for an "A' shareholder who invested at the original 4.50% sales
charge was 6.20%.
(2) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index generally representative of the intermediate-term government
and corporate bond market as a whole.
Pegasus Funds
24
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
SHORT BOND FUND
- --------------------------------------------------------------------------------
An Interview with Rick Cipicchio
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE SHORT BOND FUND PERFORM IN 1997?
The Fund's I shares returned 6.20% versus 6.67% for the Salomon Brothers
Government/Corporate 1-3 Year Bond Index. The index, however, is not subject to
the expenses of a mutual fund. The Fund's return compared favorably to the
Lipper Short U.S. Government Universe Average of 5.82% for the year.
Q. WHAT FACTORS AFFECTED THE RETURNS OF THE FUND?
The Fund's absolute return was enhanced by the decline in interest rates. The
one, two and three-year Treasuries declined by 1, 23, and 34 basis points,
respectively. The Fund's position in mortgage-backed and asset-backed
securities helped returns due to their higher yield.
Q. WHAT IS THE FUND'S CURRENT DURATION AND WHY IS IT IMPORTANT?
As of December 31, 1997, the Short Bond Fund duration was 1.6 years versus 1.7
years for the Salomon Brothers Government/Corporate 1-3 year Bond Index.
Duration is a measure of interest rate risk of a portfolio or security. The
higher the duration the higher the interest rate risk.
Q. HOW DOES THIS DURATION COMPARE TO OTHER FUNDS?
The duration of the Short Bond Fund has the shortest duration of any Pegasus
taxable bond fund. This generally allows the Fund to have a more stable NAV
versus funds with longer duration. It is also important to realize that this is
not a money market fund and the NAV will fluctuate from day to day.
Q. WHAT IS THE SHORT BOND FUND'S SECTOR ALLOCATION?
At the end of 1997, the Fund held 50% in Treasuries/Agencies, 15% in mortgage-
backed securities, 18% in asset-backed securities and 17% in high quality
corporate securities. The portfolio held 84% AAA rated securities and 16% in A
or AA rated securities.*
WHAT ARE SOME OF YOUR STRATEGIES FOR 1998?
The Fund remains overweighted in mortgage-backed and asset-backed securities
and will continue to selectively add asset-backed securities. The Fund will
also seek high quality corporation securities that have excellent risk/return
characteristics.
*The portfolio's composition is subject to change
Pegasus Funds
25
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
SHORT BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS SHORT BOND FUND AND THE SALOMON
BROTHERS GOVERNMENT/ CORPORATE 1-3 YEAR BOND INDEX
[LINE GRAPH APPEARS HERE]
(TABLE TO COME)
(1) Includes sales charge of 1.00%.
(2) Excludes expenses.
(3) An "A' shareholder investment with the original 3.00% sales charge is
currently valued at $11,821.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION ONE SINCE
THROUGH 12/31/97 DATE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS SHORT BOND FUND
I Shares -- Net of Fees 9/17/94 6.20% 6.31%
A Shares With 1.00% Load 9/17/94 4.86% 5.87%(1)
B Shares no CDSC(2) 9/23/96 5.19% 5.72%
Salomon Brothers Government/Corporate 1-3 year Bond
Index* 9/17/94 6.67% 6.84%
</TABLE>
(1) Return for an "A' Shareholder who invested at the original 3.00% sales
charge was 5.22%.
(2) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The Salomon Brothers Government/Corporate 1-3 year Bond Index is an unmanaged
index generally representative of the short-term government and corporate bond
market.
Pegasus Funds
26
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MULTI SECTOR BOND FUND
- --------------------------------------------------------------------------------
An Interview with Mark Jackson
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM IN 1997?
The Fund's I Shares provided a total return of 8.86% in 1997. This compares
favorably to the Lipper Intermediate Investment Grade Bond Fund average net
total return of 8.57%. The total return for the Lehman Brothers
Government/Corporate Index was 9.76%.
Q. WHAT FACTORS AFFECTED THE RETURN OF THE MULTI SECTOR BOND FUND DURING THE
YEAR?
The Fund's absolute return was helped by the downward move in long-term
interest rates. The yield on the benchmark ten year Treasury Note declined
nearly 70 basis points in 1997. The Fund's relative performance was adversely
affected by a slightly cautious interest rate outlook and by lagging
performance of the Fund's overweighted corporate bond and asset-backed
securities positions.
Q. THE FUND HAS UNDERGONE SOME CHANGES, COULD YOU EXPLAIN THEM?
The Fund is now investing in mortgage-backed securities, in addition to U.S.
Treasury and Agency securities, corporate bonds and asset-backed securities.
This change was made to allow shareholders to benefit from the diversification
and return potential of the mortgage-backed security sector. Anticipating
trends in interest rates will play a slightly larger role in the performance of
the Fund relative to the benchmark index. These changes are designed to enhance
the long-term total return and income of the fund. Also, the name of the Fund
was changed from the Income Fund to the Multi Sector Bond Fund to better
reflect the balanced nature of the Fund's investments and management style.
Q. HOW DID THE CRISIS IN THE ASIAN FINANCIAL MARKETS AFFECT THE FUND?
The biggest effect was to create a "flight to quality" that extended the rally
in U.S. fixed income markets. This clearly had a positive effect on the Fund's
absolute return. The Fund had no direct exposure to Asian creditors. Many of
these issuers saw their credit ratings slide below investment grade. The flight
to quality did, however, cause corporate bond and asset-backed security returns
to lag returns for U.S. Treasury securities. The Fund's overweighted position
in both these sectors had a negative impact on fourth quarter performance
relative to the benchmark index.
Q. WHAT ARE SOME OF YOUR STRATEGIES FOR 1998?
We plan to remain overweighted in corporate and asset-backed securities in
anticipation of a rebound from the fourth quarter weakness in these sectors and
mortgage-backed securities with superior risk/return characteristics will
continue to be added to the portfolio. We believe the Fund is well positioned
to outperform the benchmark index.
Pegasus Funds
27
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MULTI SECTOR BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE
PEGASUS MULTI SECTOR BOND FUND*
AND LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX**
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Pegasus Multi-Sector Bond Fund
Lehman Brothers
Government Corporate Bond
I-Shares A Shares (1) B Shares (1) Index (2)
<S> <C> <C> <C> <C>
3/5/93 10000 9700 10000
12/31/93 10376 10065 10532
6/30/94 10173 9881 10076
12/31/94 10277 9969 10163
6/30/95 11362 11000 11361
12/31/95 12079 11684 12118
6/30/96 11894 11475 11890
12/31/96 12458 12005 12470
6/30/97 12766 12286 12812
12/31/97 13562 13035 13687
</TABLE>
(1) Includes sales charge of 3.00%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION SINCE
THROUGH 12/31/97 DATE ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS MULTI SECTOR BOND FUND*
I Shares *3/5/93 8.86% 6.52%
A Shares With 3.00% Load *3/5/93 5.33% 5.65%
B Shares With 2.00% CDSC(1) *5/31/95 5.75% 5.56%
Lehman Brothers Government/Corporate Bond Index** 3/5/93 9.76% 6.72%
</TABLE>
(1) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*Formerly the Pegasus Income Fund
**The Lehman Government/Corporate Bond Index is an unmanaged index generally
representative of the government and corporate bond market as a whole.
Pegasus Funds
28
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
An Interview with Claude Erb
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE INTERNATIONAL BOND FUND PERFORM IN 1997?
The Fund was able to outperform its benchmark for the third straight year
(second calendar year). The International Bond Fund had a total return of -
4.25% (I Shares) versus -4.26% for the Salomon Brothers Non-US Government Bond
Index (US dollars unhedged) for the year ended December 31, 1997. Given the
volatile and trying times in the global bond market in 1997, we were happy to
outperform our benchmark.
Q. WHAT IN PARTICULAR DROVE THE FUND'S PERFORMANCE?
We can say that interest rate bets did not drive performance. The Fund, for the
most part, had a neutral stance towards interest rates in 1997. That is the
Fund maintained a duration, or interest rate sensitivity, similar to that of
its underlying benchmark. However the Fund did make some active decisions
towards the countries in which it was invested.
Q. IF COUNTRY SELECTION IS IMPORTANT FOR THE FUND, WHAT MARKETS DID YOU
EMPHASIZE DURING 1997?
Japan is the largest country in the non-US government bond market. We continued
our long-standing underweighting of Japan, which returned
- -4.84%. We have felt for some time that the low yields in Japan do not
compensate us for the risk involved there. A disappointing market was New
Zealand with a -12.3% return whose currency was caught up in the Asian crisis.
In the fourth quarter the Fund also increased its weighting in the emerging
markets. Investments in Argentina, Brazil and Russia all experienced
significant volatility during this period.
Q. WE HAVE HEARD A GREAT DEAL ABOUT THE TURMOIL IN ASIA. HOW HAS THIS AFFECTED
THE FUND?
As mentioned, the Asian crisis had a spillover effect in other emerging
markets. We saw the yields in those markets increase dramatically as the crisis
unfolded. Some stability returned towards the end of the year, but the markets
did not rebound entirely. The Asian crisis also prompted more strength in the
US dollar. The overall market's poor performance was driven by the strength in
the dollar. In fact the currency-hedged version of the Salomon Brothers Non-US
Government Bond Index increased 11.07% for the year. Other Asian markets, i.e.
Australia and New Zealand, were also hurt by their economic ties to the region.
Q. WHAT AFFECT WILL THE CREATION OF THE EURO HAVE ON THE FUND?
The European markets experienced falling interest rates and depreciating
currencies. Some of the best performing continental markets were those non-core
markets, i.e. Italy and Spain, which will be helped by their inclusion in the
first round of the Euro. The introduction of the Euro will be a long and
tumultuous process. It is one of the largest and most important monetary
experiments ever undertaken. With the elimination of a number of currencies,
the European markets will be driven solely by macroeconomic and credit
concerns.
Q. HOW DO YOU HAVE THE FUND POSITIONED FOR 1998?
In regards to interest rate sensitivity, the Fund remains largely duration
neutral. We do not believe that global interest rates have a great deal of room
to fall in 1998. Our primary emphasis remains to underweight Japan. Japan still
has significant macroeconomic problems it needs to work through. In our search
for high risk-adjusted yields we have begun emphasizing the emerging markets.
We feel that the greatest opportunities lie in these markets. However, some
developed markets like Australia and New Zealand continue to remain attractive.
In the fast-changing world of bond markets, unforeseen investment opportunities
arise from time to time. We will continue to seek out these attractive
risk/reward opportunities.
*The portfolio's composition is subject to change. International investing is
subject to certain factors such as currency exchange rate volatility, possible
political, social or economic instability, foreign taxation and differences in
auditing and other financial standards.
Pegasus Funds
29
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERNATIONAL BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS INTERNATIONAL BOND FUND AND THE
SALOMON BROTHERS NON-U.S. WORLD GOVERNMENT BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SALOMON BROTHERS
NON-U.S. WORLD
I SHARES A SHARES B SHARES GOVERMENT
<S> <C> <C> <C> <C>
1/27/95 $10,000 $9,550 $10,000 $10,000
6/30/95 $11,703 $11,280 $11,658 $11,770
12/31/95 $12,210 $11,743 $12,090 $11,722
6/30/96 $12,224 $11,725 $12,028 $11,570
12/31/96 $12,941 $12,402 $12,696 $12,200
6/30/97 $12,488 $11,955 $12,207 $11,820
12/31/97 $12,391 $11,849 $11,756 $11,680
</TABLE>
(1) Includes sales charge of 4.50%.
(2) Includes contingent deferred sales charge of 3.00%.
(3) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION SINCE
THROUGH 12/31/97 DATE ONE YEAR INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
PEGASUS INTERNATIONAL BOND FUND
I-Shares 1/27/95 -4.25% 7.59%
A-Shares With 4.50% Load 1/27/95 -8.76% 5.96%
B-Shares With 3.00% CDSC 1/27/95 -7.79% 5.68%
Salomon Brothers Non-U.S. World Government Bond
Index* 1/27/95 -4.26% 5.44%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Salomon Brothers Non-U.S. Government Bond Index is an unmanaged index
generally representative of the world government bond markets.
Pegasus Funds
30
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
An Interview with Mark Durbiano and Constantine Kartsonas
Portfolio Managers
- --------------------------------------------------------------------------------
Q. WHAT FACTORS IMPACTED THE HIGH YIELD MARKET DURING 1997?
The Pegasus High Yield Bond Fund made its initial investments into the high
yield bond market during July, 1997. From July 31, 1997 through December 31,
1997, the high yield market generated attractive relative returns. For example,
the Lehman Brothers High Yield Bond Index returned 3.71% for the period versus
3.58% for the Lehman Aggregate Index, a measure of high quality bond
performance. The major factor for the superior relative performance of high
yield bonds was the almost ideal economic environment which existed for most of
1997. Strong steady economic growth coupled with low inflation resulted in
declining interest rates (the yield on 10-year US government securities
declined about 60 basis points) and good operating performance for most high
yield issuers. The high yield market also benefited from strong demand for high
yield securities as investors were attracted to the historically strong total
return performance of the marketplace and the attractive yields offered by high
yield securities in a falling interest rate environment. During the fourth
quarter, the high yield market was negatively impacted by turmoil in Asia as
investors attempted to quantify Asia's impact on domestic economic growth in
1998.
Q. WHAT IN PARTICULAR DROVE THE FUND'S PERFORMANCE?
The Pegasus High Yield Bond Fund outperformed both the Lipper High Current
Yield Fund Average and the Lehman Brothers High Yield Bond Index for the 5
months ended December 31, 1997. Several factors benefited the fund versus the
benchmarks. The Fund's largest industry exposures have been (and continue to
be) telecommunications, cable and broadcasting. These three sectors generated
very strong performance versus the market during the period. The Fund was
generally underweighted in basic industries such as steel, forest products and
commodity chemicals. These sectors underperformed especially in the fourth
quarter as economic concerns about 1998 began to increase. The portfolio also
had no exposure to emerging Asian markets which were negatively impacted in the
fourth quarter by economic and currency turmoil. Several portfolio holdings
were involved in corporate finance activities such as mergers, initial public
offerings (IPO's) and
tenders which proved beneficial to bondholders. For example, Ralph's Grocery
and Brooks Fiber have announced plans to be acquired while AMF and
International Home Foods did initial stock offerings. Finally, the portfolio
benefited from outstanding individual security selection avoiding major
deteriorating situations while holding numerous strong performers. Nextel,
Teleport, American Communications and Echostar were particularly strong
performers.
Q. WHAT IS YOUR OUTLOOK FOR THE YEAR AHEAD?
As we look to 1998, the main area of uncertainty is what impact the developing
problems in Asia will have on U.S. economic growth, inflation and equity
markets. It would appear that the problems in Asia will serve to slow the U.S.
economy and reduce inflation much like a Federal Reserve tightening. This could
serve to head off inflationary fears, reduce the likelihood of a Fed tightening
and extend the economic expansion. An extended economic expansion would be a
long term positive for high yield bonds. The risk is that Asia's problems have
a greater impact on the U.S. economy and push the domestic economy into
recession. Superior credit selection will be essential in 1998 and the odds-on-
bet is for slower economic activity which could lead to negative credit
surprises. From a portfolio perspective, we continue to like companies that are
benefiting from secular growth like telecommunications and companies in
consolidating businesses like cable and broadcasting.
Although the Fund's yield may be higher than that of fixed income Funds that
purchase higher-rated securities, the potentially higher yield is a function of
the greater risk that the Fund's share price will decline.
Pegasus Funds
31
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS HIGH YIELD BOND FUND AND THE LEHMAN
BROTHERS HIGH YIELD BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
High Yield Bond
High Yield Bond Fund I Shares Net A Shares w/4.50% Load B Shares w/ 5% CDSC Index
- -------------------- ------------ --------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
6/30/97 10,000 9,550 10,000 10,000
7/97 10,177 9,665 10,120 10,275
8/97 10,183 9,598 10,050 10,251
9/97 10,411 9,749 10,210 10,454
10/97 10,381 9,721 10,162 10,464
11/97 10,479 9,809 10,248 10,564
12/97 10,637 9,950 9,894 10,656
</TABLE>
(1) Includes sales charge of 4.50%.
(2) Includes contingent deferred sales charge of 5.00%.
(3) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION SINCE
THROUGH 12/31/97 DATE INCEPTION
- --------------------------------------------------------------------------------------
<S> <C> <C>
PEGASUS HIGH YIELD BOND FUND
I Shares 6/30/97 6.37%
A Shares With 4.50% Load 6/30/97 -0.49%
B Shares With 5.00% CDSC 6/30/97 -1.06%
Lehman Brothers High Yield Bond Index* 6/30/97 6.56%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception data.
In such instances, and without waiver of fees, total return would have been
lower.
*The Lehman Brothers High Yield Bond Index is an unmanaged index generally
covering the universe of fixed rate, publicly issued, non investment grade
debt registered with the SEC.
Pegasus Funds
32
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
An Interview with Robert Grabowski
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE YEAR ENDED DECEMBER 31, 1997?
The Fund's I share return was 9.32% versus 9.19% for the Lehman Brothers
Municipal Bond Index (Index). The index, however, is not subject to the
expenses of a mutual fund. The Fund's return compared favorably to the average
return of 9.11% in the Lipper General Municipal Debt Funds peer group.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
The outperformance by the Fund relative to the Index during the year was
attributable to its longer duration, overweighting in the revenue and insured
sectors, and its underweighted stance in prerefunded bonds. The minimal average
cash position of the Fund also added to the incremental return. The Fund's
overweighting in the housing sector and callable bond position were the main
reasons for a drag on performance. The Fund's high quality position was also a
negative as overall quality spreads narrowed dramatically.
Q. WHAT ARE THE FUND'S INVESTMENT CHARACTERISTICS?
As of December 31, 1997, the Fund held 44% in insured securities, 33% in
revenue securities, 21% in general obligation bonds, and 2% in prerefunded
bonds. The Fund remains in higher credit-quality issues: 80% of the Fund is
rated AA or better. The remaining 20%, of which 10% is rated A and 10% rated
Baa, are issues which help enhance the yield in the Fund through selectively
adding minimal credit risk.* The Fund's average maturity on a call-adjusted
basis was 10.4 years versus 8.4 years for the Index, and its duration (a
measure of interest rate risk) was 7.4 years versus 6.2 years for the Index.
Q. WHY WAS THE FUND'S CASH POSITION AT YEAR-END SO LOW AND WHAT IS YOUR
PHILOSOPHY REGARDING CASH?
The Fund's cash position at year end was purposely taken down to a bare minimum
to stay fully invested in anticipation of a continued decline in interest rates
and to position itself to benefit from the "January Effect" (low municipal bond
issuance coupled with heavy cash flow in the market from maturities and coupon
payments). For the year, the Fund's average cash position was just slightly
over one percent. This practice allows for the Fund to provide as steady a
dividend stream as possible by using a minimal amount of lower-yielding cash
equivalent securities when repositioning of the portfolio is warranted.
Q. WHAT WAS THE OVERALL PERFORMANCE OF THE MUNICIPAL MARKET DURING 1997?
The municipal bond market outperformed the taxable bond market on a relative
basis, but not on an absolute basis, for the year as indicated by the returns
of the Lehman Brothers Municipal Bond and Aggregate Bond indices. The drop in
interest rates also had a profound effect on the municipal market as new-issue
volume increased substantially during the year, totaling $220.4 billion, up 19%
from the prior year and, was the third highest issuance of tax- exempt debt in
the history of the market. For the year, the best performing investment grade
sector of the municipal bond market was revenue securities with a 9.81% return.
Insured, general obligation, and prerefunded bonds returned 9.58%, 8.80%, and
6.17% respectively. The best performing component of the revenue sector was
hospital bonds and the worst performing element was electric utilities.
Q. WHAT ARE SOME OF YOUR STRATEGIES FOR 1998?
We plan to continue to maintain the Fund's current long-duration position as
municipal bonds remain attractive versus Treasuries on a ratio basis and the
probability that the Fed will not move anytime soon in changing monetary policy
until the current turmoil in the Asian market subsides. The Fund will be
looking to add structure (modest discounts with good call protection) to the
portfolio. The maturity range of preference is the intermediate sector (12 to
17 years) as nearly 95 percent of the municipal yield curve is captured and
should offer the best relative value total return. Also, with the historic
narrow quality spreads, the Fund will look to add incremental return by
selectively adding revenue bonds for incremental return pick-up.
*The portfolio's composition is subject to change.
Pegasus Funds
33
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MUNICIPAL BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS MUNICIPAL BOND FUND AND THE LEHMAN
BROTHERS MUNICIPAL BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
A Shares Municipal Bond Index
<S> <C> <C>
3/1/88 9,550 10,000
6/88 9,489 10,075
12/88 10,147 10,526
6/89 10,809 11,223
12/89 11,166 11,662
6/90 11,414 11,987
12/90 12,033 12,512
6/91 12,549 13,068
12/91 13,458 14,031
6/92 14,014 14,606
12/92 14,728 15,267
6/93 15,652 16,353
12/93 16,309 17,142
6/94 15,882 16,381
12/94 15,987 16,256
6/95 17,587 17,825
12/95 18,588 19,094
6/96 18,468 19,009
12/96 19,316 19,942
6/97 19,898 20,581
12/97 21,079 21,777
</TABLE>
(1) Includes sales charge of 4.50%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION SINCE
THROUGH 12/31/97 DATE ONE YEAR FIVE YEARS INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS MUNICIPAL BOND FUND
I Shares(1) 2/1/95 9.32% N/A 9.28%
A Shares With 4.50% Load 3/1/88 4.22% 6.45 7.88%
B Shares With 3.00% CDSC(1) 4/4/95 5.26% N/A 6.09%
Lehman Brothers Municipal Bond Index* 3/1/88 9.19% 7.36 8.24%
</TABLE>
(1) The performance of the I and B Shares will be more or less than the A
Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole.
Pegasus Funds
34
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
An Interview with Jonathan Nicholl
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE YEAR ENDED DECEMBER 31, 1997?
The Fund's I share return was 7.29% versus 7.67% for the Lehman Brothers 7-Year
Municipal Bond Index (Index). The Index, however, is not subject to the
expenses of a mutual fund. The Fund's return compared favorably to the average
return of 7.16% in the Lipper Intermediate Municipal Debt Funds peer group.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
Fund performance was helped by the Fund's longer duration relative to its
Index, as well as the continued emphasis on bonds with good call protection and
a minimal overall cash position throughout the year. The Fund's large
allocation to the prerefunded sector and higher overall credit quality in a
narrowing credit-spread environment were the primary reasons for a drag on
performance relative to the Index.
Q. WHAT ARE THE FUND'S INVESTMENT CHARACTERISTICS?
As of December 31, 1997, the Fund held 43% in revenue securities, 25% in
general obligation bonds, 20% in insured securities, and 12% in prerefunded
bonds.* The Fund retains its bias towards higher credit quality, with 79% of
the portfolio rated AA or higher. The call-adjusted average maturity of the
portfolio was 6.7 years and its duration (a measure of interest rate risk) was
5.5 years.
Q. DOES THE ASIAN CURRENCY CRISIS AFFECT MUNICIPAL BONDS?
The credit quality of the holdings in the Fund is largely insulated from the
economic problems currently facing Southeast Asia. While a small proportion of
the portfolio's holdings derive their credit quality from corporate obligors,
the vast majority of the Fund's investments rely on municipal project
financings or operations. In addition, the high proportion of municipal bonds
that carry bond insurance provides an extra layer of credit protection. Of
course, the market value of the bonds will fluctuate with the general interest
rate environment. The currency crisis will likely cause a slowing of overall
economic growth, although the magnitude of the effect is uncertain. Generally
speaking, fixed-income instruments appreciate in slowing economic climates, as
inflation worries subside. As a result, we believe municipal bonds are probably
one of the asset classes best insulated from the Asian crisis.
Q. WHAT TYPES OF SECURITIES WILL THE FUND BE BUYING IN 1998?
The Fund will maintain its bias towards higher credit-quality securities.
Credit spreads (the yield differential between lower-rated and higher-rated
securities) are historically narrow right now. As a result, we do not feel
adequately compensated for taking additional credit risk in the current market
environment. Thus, the Fund will continue to look primarily to the insured
sector and, to a lesser extent, the general obligation sector, and de-emphasize
revenue bonds. The Fund's allocation to the prerefunded sector will also be
reduced on an opportunistic basis.
*The portfolio's composition is subject to change.
Pegasus Funds
35
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERMEDIATE MUNICIPAL BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS INTERMEDIATE MUNICIPAL BOND FUND AND
THE LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers 7-Year
I-Shares A Shares B Shares C Shares Municipal Bond
<S> <C> <C> <C> <C> <C>
3/1/88 $ 9,700
6/88 9,882
12/88 10,334
6/89 10,797
12/89 11,265 10,000
6/90 11,534 10,274
12/90 12,118 10,740
6/91 12,619 11,187
12/91 13,556 11,993
6/92 13,987 12,410
12/92 14,537 12,959
6/93 15,329 13,743
12/93 16,001 14,311
6/94 15,667 13,916
12/94 15,619 13,914
1/30/95
6/95 16,806 15,062
12/95 17,578 15,883
6/96 17,546 15,896
12/96 18,227 16,579
6/97 18,655 17,018
12/97 12,428 19,513 17,854
</TABLE>
(1) Includes sales charge of 3.00%
(2) Excludes expenses
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN INCEPTION SINCE
THROUGH 12/31/97 DATE ONE YEAR FIVE YEARS INCEPTION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
I Shares(1) 1/30/95 7.29% N/A 7.73%
A Shares With 3.00% Load 3/1/88 3.84% 5.42 7.03%
B Shares With 2.00% CDSC(1) 1/30/95 4.19% N/A 5.96%
Lehman Brothers 7-year Municipal Bond Index* 12/31/89 7.67% 6.62 7.51%
</TABLE>
(1) The performance of the I and B Shares will be more or less than the A
Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers 7-year Municipal Bond Index (which began in 1989) is an
unmanaged index generally representative of the intermediate-term municipal
bond market.
Pegasus Funds
36
<PAGE>
PEGASUS FUNDS
MANAGEMENT DISCUSSION AND ANALYSIS
MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
An Interview with Rebecca Gersonde
Portfolio Manager
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE YEAR ENDED DECEMBER 31, 1997?
The Fund's I shares return was 9.42%, matching the return of the Lehman
Brothers Michigan Municipal Bond Index (Index). The Index, however, is not
subject to the expenses of a mutual fund. The Fund's return number compared
favorably to the average return of 8.50% in the Lipper Michigan Municipal Debt
Funds peer group.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
Positive performance by the Fund relative to the Index during the year was
attributable to its longer duration, overweighting in the revenue sector,
primarily hospital bonds, and an underweighting in prerefunded securities. A
minimal average cash position was also a positive for the Fund's total return.
Underweighting in the insured sector (the best performing sector in the
Michigan market) and the propensity for holding higher credit-quality issues as
credit spreads narrowed during the year hindered performance.
Q. WHAT ARE THE FUND'S INVESTMENT CHARACTERISTICS?
As of December 31, 1997, the Fund held 39% in revenue securities, 37% in
insured securities, 18% in general obligation bonds, 2% in prerefunded bonds,
and 4% in cash. The Fund remains primarily invested in higher credit-quality
issues: 78% of the Fund is rated Aa or better. The remaining 22%, of which 16%
is rated A and 6% is rated Baa, are issues which enhance the yield in the Fund
through selectively adding low credit risk.* The Fund's average maturity was
8.9 years (call adjusted) and its duration (a measurement of interest rate
risk) was 6.7 years.
Q. HOW DID THE MICHIGAN ECONOMY FARE DURING 1997?
The State's economy experienced another good year as the jobless rate averaged
4.2% compared to the National level of 4.9%. Michigan's unemployment numbers
have consistently remained below U.S. rates for 33 consecutive months. The
manufacturing sector was primarily responsible for leading the way towards the
strong job growth in 1997. Michigan has made inroads towards diversifying its
economy from one so heavily reliant on manufacturing (which accounts for 33% of
total state personal income) to that of a service related one. Debt levels in
the State remain below national averages; overall debt issuance for the year
was up 8% versus 1996 levels, while the National market was up approximately
19%. Michigan's Budget Stabilization Fund ("Rainy Day Fund") ended 1997 in a
surplus position with its cash reserve in excess of $1.2 billion.
Q. HAS THERE BEEN ANY NOTICEABLE CHANGE IN THE COMPOSITION OF THE MUNICIPAL
MARKET?
The one area that has drawn the largest attention during the year has been the
dramatic increase in bond insurance. As a percentage of total municipal debt
issued during 1997, bond insurance accounted for almost 50% of the tax exempt
market. The surge in bond insurance can be largely attributed to the value both
issuers and investors alike feel this credit enhancement affords them, given
the financial stability of the insurers and their sound historical claims-
paying ability. For issuers, the premiums paid to assure timely payment of
principal and interest to its bondholders (should a default situation arise)
has declined so significantly that the interest savings achieved more than
offsets the cost of the insurance. For the investor, not only are principal and
interest payments secured, but liquidity is preserved during financial or
economic pressures. With the ongoing focus placed on the insurers to maintain
their AAA ratings coupled with the comfort insurance provides both issuers and
investors, bond insurance will continue to play a major role in influencing and
changing the municipal market.
*The portfolio's composition is subject to change.
Pegasus Funds
37
<PAGE>
PEGASUS FUNDS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MICHIGAN MUNICIPAL BOND FUND -- (CONTINUED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE PEGASUS MICHIGAN MUNICIPAL BOND FUND AND THE
LEHMAN BROTHERS MICHIGAN BOND INDEX*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Michigan Municipal I I-Shares Net A-Shares(1) B-Shares Michigan Bond
<S> <C> <C> <C> <C>
2/1/93 $10,000 $ 9,550
6/93 $10,533 $10,059 $10,000
12/93 $11,053 $10,555 $10,470
6/94 $10,521 $10,047 $10,011
12/94 $10,454 $ 9,984 $ 9,938
6/95 $11,400 $10,887 $10,947
12/95 $12,179 $11,631 $11,770
6/96 $12,047 $11,505 $11,715
12/96 $12,598 $12,016 $12,296
6/97 $13,009 $12,394 $12,700
12/97 $13,784 $13,116 $13,455
</TABLE>
(1) Includes sales charge of 4.50%.
(2) Excludes expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN INCEPTION ONE FIVE SINCE
THROUGH 12/31/97 DATE YEAR YEAR INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PEGASUS MICHIGAN MUNICIPAL BOND FUND
I Shares -- Net of Fees 2/1/93 9.42% N/A 6.75%
A Shares With 4.50% Load 2/1/93 4.24% N/A 5.68%
B Shares With 4.00% CDSC(1) 9/23/96 4.26% N/A 5.39%
Lehman Brothers Michigan Municipal Bond Index* 7/1/93 9.42% N/A 6.82%
</TABLE>
(1) The performance of the B Shares will be less than the performance shown for
the I Shares due to the differences in loads and fees paid by shareholders
investing in the different classes.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
*The Lehman Brothers Michigan Municipal Bond Index (which began in 1993) is an
unmanaged index generally representative of the Michigan municipal bond
market.
Pegasus Funds
38
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS MANAGED ASSETS MANAGED ASSETS EQUITY GROWTH MID-CAP
CONSERVATIVE FUND BALANCED FUND GROWTH FUND INCOME FUND FUND OPPORTUNITY FUND
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in securi-
ties:
At cost $ 112,166,645 $ 248,977,942 $ 13,019,613 $ 258,050,039 $ 411,800,398 $ 710,340,845
- ----------------------------------------------------------------------------------------------------------------------
At value (Note 2) $ 114,485,438 $ 253,817,691 $ 13,018,739 $ 319,032,396 $ 642,791,308 $ 1,049,752,610
Cash 168 127 2,954 -- -- 97
Receivable for securi-
ties sold -- 2,150 -- -- 17,195 4,857,864
Receivable for fund
shares sold 74,973 92,069 378,319 2,641 320,452 236,903
Income receivable 18,874 52,977 2,240 1,133,604 403,863 759,470
Deferred organization
costs, net (Note 2) 40,546 9,447 -- 30,151 34,100 --
Prepaids and other as-
sets 46,065 172,850 24,001 20,714 83,032 256,677
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 114,666,064 254,147,311 13,426,253 320,219,506 643,649,950 1,055,863,621
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities
purchased 2,693 -- 317,124 13,984 -- 13,403,241
Accrued investment advi-
sory fees 62,116 137,889 6,559 135,211 297,924 514,548
Accrued transfer and
dividend disbursing
agent fees 5,900 56,054 1,050 3,110 15,494 80,118
Accrued custodial fees 3,750 6,498 2,900 4,649 6,630 9,300
Administration fees pay-
able 14,335 31,821 1,514 40,563 74,529 128,637
Shareholder services
fees payable (Class A
Shares) 11,319 26,219 1,081 2,768 17,512 47,171
Shareholder services
fees payable (Class B
Shares) 3,230 1,869 1,216 670 360 740
12b-1 fees payable
(Class B Shares) 10,416 5,606 3,639 1,955 2,195 2,221
Dividends payable 10,106 3,882 27 10,707 -- 50
Payable for fund shares
redeemed 19,697 5,637 100 6,200 22,923 23,198
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 143,562 275,475 335,210 219,817 437,567 14,209,224
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 114,522,502 $ 253,871,836 $ 13,091,043 $ 319,999,689 $ 643,212,383 $ 1,041,654,397
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
39
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS MID-CAP
CONSERVATIVE MANAGED ASSETS MANAGED ASSETS EQUITY GROWTH OPPORTUNITY
FUND BALANCED FUND GROWTH FUND INCOME FUND FUND FUND
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, OFFER-
ING PRICE AND REDEMPTION
PRICE PER SHARE:
CLASS A SHARES:
Net Assets $ 90,835,386 $141,803,809 $ 5,724,639 $ 12,583,119 $ 62,561,833 $ 234,019,581
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 6,076,825 11,894,951 497,204 963,796 4,152,571 11,203,992
- ---------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 14.95 $ 11.92 $ 11.51 $ 13.06 $ 15.07 $ 20.89
Maximum sales charge per
share(1) 0.79 0.63 0.61 0.69 0.79 1.10
- ---------------------------------------------------------------------------------------------------------------
Maximum offering price
per share $ 15.74 $ 12.55 $ 12.12 $ 13.75 $ 15.86 $ 21.99
- ---------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net Assets $ 13,377,680 $ 10,025,684 $ 5,936,435 $ 3,156,636 $ 2,160,866 $ 3,965,140
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 893,858 755,293 522,850 241,897 145,391 374,706
- ---------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 14.97 $ 13.27 $ 11.35 $ 13.05 $ 14.86 $ 10.58
- ---------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Net Assets $ 10,309,436 $102,042,343 $ 1,429,969 $304,259,934 $578,489,684 $ 803,669,676
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 687,315 8,569,472 123,628 23,375,587 38,373,830 38,391,879
- ---------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 15.00 $ 11.91 $ 11.57 $ 13.02 $ 15.08 $ 20.93
- ---------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET AS-
SETS:
Shares of beneficial in-
terest, at par $ 765,800 $ 2,121,972 $ 114,368 $ 2,458,128 $ 4,267,179 $ 4,997,058
Additional paid-in capi-
tal 105,416,026 232,421,785 12,502,930 249,191,647 400,810,290 688,237,503
Accumulated undistrib-
uted net investment in-
come 64,607 193,830 2,779 298,296 118 500
Accumulated undistrib-
uted net realized gains 5,957,276 14,294,500 471,840 7,069,261 7,143,886 9,007,571
Net unrealized apprecia-
tion (depreciation) on
investments 2,318,793 4,839,749 (874) 60,982,357 230,990,910 339,411,765
- ---------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $114,522,502 $253,871,836 $13,091,043 $319,999,689 $643,212,383 $1,041,654,397
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Maximum sales charges are 5.00% of Maximum Offering Price per share unless
otherwise noted.
See accompanying Notes to Financial Statements.
Pegasus Funds
40
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL-CAP INTRINSIC VALUE GROWTH & VALUE EQUITY INDEX INTERNATIONAL
OPPORTUNITY FUND FUND FUND FUND EQUITY FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in securi-
ties:
At cost $194,298,293 $505,182,618 $ 746,130,933 $511,580,181 $462,587,211
- ----------------------------------------------------------------------------------------------------
At value (Note 2) $241,666,698 $625,255,643 $1,062,225,748 $834,363,189 $514,569,067
Cash -- 35 44 254 110,119
Receivable for variation
margin on futures con-
tracts -- -- -- -- 1,542
Unrealized appreciation
on foreign exchange con-
tracts -- -- -- -- 666,402
Receivable for securi-
ties sold 80,173 -- -- -- --
Receivable for fund
shares sold 126,427 294,205 727,252 17,501 292,723
Income receivable 79,432 1,512,749 1,207,199 1,129,147 613,762
Reclaim receivable -- -- -- -- 541,440
Deferred organization
costs, net (Note 2) 30,335 -- -- -- 24,057
Prepaids and other as-
sets 32,500 51,740 188,580 333,166 111,342
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS 242,015,565 627,114,372 1,064,348,823 835,843,257 516,930,454
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities
purchased 276,520 617,924 337,577 529,588 11,055
Accrued investment advi-
sory fees 138,658 312,580 532,565 69,881 345,309
Accrued transfer and
dividend disbursing
agent fees 5,410 22,813 60,614 34,057 --
Accrued custodial fees 4,439 7,001 11,145 9,529 29,807
Administration fees pay-
able 29,763 78,145 133,141 104,822 64,745
Shareholder services
fees payable (Class A
Shares) 4,431 15,748 32,142 39,420 5,360
Shareholder services
fees payable (Class B
Shares) 318 574 980 313 361
12b-1 fees payable
(Class B Shares) 1,568 1,722 2,939 937 1,082
Withholding Tax payable -- -- -- -- 7,551
Dividends payable -- 7,092 4,155 4,177 3,269
Payable for fund shares
redeemed 12,221 9,826 165,751 4,446 4,662
Other payables and ac-
crued expenses -- -- -- -- 4,386
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 473,328 1,073,425 1,281,009 797,170 477,587
- ----------------------------------------------------------------------------------------------------
NET ASSETS $241,542,237 $626,040,947 $1,063,067,814 $835,046,087 $516,452,867
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
41
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTRINSIC
SMALL-CAP VALUE GROWTH & VALUE EQUITY INDEX INTERNATIONAL
OPPORTUNITY FUND FUND FUND FUND EQUITY FUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, OFFER-
ING PRICE AND REDEMPTION
PRICE PER SHARE:
CLASS A SHARES:
Net Assets $ 21,835,548 $ 82,790,941 $ 162,393,347 $193,663,013 $ 26,703,310
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 1,361,809 5,285,120 9,916,334 9,066,009 2,204,629
- ----------------------------------------------------------------------------------------------------
Net asset value per
share $ 16.03 $ 15.66 $ 16.38 $ 21.36 $ 12.11
Maximum sales charge per
share(1) 0.84 0.82 0.86 0.66(2) 0.64
- ----------------------------------------------------------------------------------------------------
Maximum offering price
per share $ 16.87 $ 16.48 $ 17.24 $ 22.02 $ 12.75
- ----------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net Assets $ 1,799,023 $ 3,301,574 $ 5,107,031 $ 1,514,644 $ 1,763,332
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 114,264 294,018 501,229 116,395 155,070
- ----------------------------------------------------------------------------------------------------
Net asset value per
share $ 15.74 $ 11.23 $ 10.19 $ 13.01 $ 11.37
- ----------------------------------------------------------------------------------------------------
CLASS I SHARES:
Net Assets $217,907,666 $539,948,432 $ 895,567,436 $639,868,430 $487,986,225
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue, unlimited number of
shares authorized 13,431,245 34,455,448 54,653,280 29,949,195 40,193,776
- ----------------------------------------------------------------------------------------------------
Net asset value per
share $ 16.22 $ 15.67 $ 16.39 $ 21.37 $ 12.14
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET AS-
SETS:
Shares of beneficial in-
terest, at par $ 1,490,732 $ 4,003,459 $ 6,507,084 $ 3,913,160 $ 4,255,348
Additional paid-in capi-
tal 187,920,480 493,993,292 726,832,464 506,673,609 468,930,030
Accumulated undistrib-
uted net investment in-
come -- 290,531 455,846 135,185 (691,163)
Accumulated undistrib-
uted net realized gains
(losses) 4,762,620 7,680,640 12,839,993 1,541,125 (7,947,601)
Net unrealized apprecia-
tion on investments 47,368,405 120,073,025 316,432,427 322,783,008 51,981,856
Net unrealized deprecia-
tion of assets and lia-
bilities denominated in
foreign currencies and
financial futures -- -- -- -- (75,603)
- ----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $241,542,237 $626,040,947 $1,063,067,814 $835,046,087 $516,452,867
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1)Maximum sales charges are 5.00% of Maximum Offering Price per share unless
otherwise noted.
(2)Maximum sales charge is 3.00% of Maximum Offering Price per share.
See accompanying Notes to Financial Statements.
Pegasus Funds
42
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE SHORT MULTI SECTOR INTERNATIONAL HIGH
BOND BOND BOND BOND BOND YIELD
FUND FUND FUND FUND FUND BOND FUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in securi-
ties:
At cost $507,466,938 $1,167,551,781 $236,334,002 $ 97,838,368 $90,706,670 $48,369,311
- ---------------------------------------------------------------------------------------------------------
At value (Note 2) $520,624,190 $1,222,578,317 $237,436,213 $101,683,183 $85,909,632 $48,977,952
Cash -- -- -- -- 124,557 --
Receivable for securi-
ties sold -- -- -- -- 16,253 --
Receivable for fund
shares sold -- 639,218 -- -- 84,075 --
Income receivable 5,150,762 10,434,120 2,849,060 1,196,698 2,197,904 853,232
Reclaim receivable -- -- -- -- 94,246 --
Deferred organization
costs, net (Note 2) -- -- 11,911 19,979 28,879 23,084
Prepaid and other assets 167,896 142,788 71,867 76,436 8,181 --
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS 525,942,848 1,233,794,443 240,369,051 102,976,296 88,463,727 49,854,268
- ---------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities
purchased 230,562 2,292,716 3,596 5,556 -- --
Accrued investment advi-
sory fees 178,274 410,717 72,337 34,989 52,856 28,601
Accrued transfer and
dividend disbursing
agent fees 21,481 32,703 5,873 4,340 2,058 299
Accrued custodial fees 7,195 13,802 4,097 2,046 8,884 1,575
Administration fees pay-
able 75,782 154,019 31,017 13,120 11,120 6,128
Shareholder services
fees payable (Class A
Shares) 7,506 22,771 592 1,851 1,314 95
Shareholder services
fees payable (Class B
Shares) 73 664 103 125 873 12
12b-1 fees payable
(Class B Shares) 220 1,992 310 267 87 75
Dividends payable 11,215 50,376 589 1,541 393 1,851
Payable for fund shares
redeemed 3,737 12,118 -- 3,670 701 --
Other payables and ac-
crued expenses -- -- -- -- 5,760 18,618
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 536,045 2,991,878 118,514 67,505 84,046 57,254
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $525,406,803 $1,230,802,565 $240,250,537 $102,908,791 $88,379,681 $49,797,014
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
43
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE SHORT MULTI SECTOR INTERNATIONAL HIGH
BOND BOND BOND BOND BOND YIELD
FUND FUND FUND FUND FUND BOND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, OFFER-
ING PRICE AND REDEMPTION
PRICE PER SHARE:
CLASS A SHARES:
Net Assets $ 42,343,077 $ 125,515,486 $ 4,738,270 $ 7,832,393 $ 6,419,244 $ 569,747
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue,
unlimited number of
shares authorized 4,043,105 11,849,709 466,906 979,458 649,764 55,794
- --------------------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 10.47 $ 10.59 $ 10.15 $ 8.00 $ 9.88 $ 10.21
Maximum Sales charge per
share 0.32(3) 0.50(2) 0.10(1) 0.25(3) 0.47(2) 0.48(2)
- --------------------------------------------------------------------------------------------------------------------------
Maximum offering price
per share $ 10.79 $ 11.09 $ 10.25 $ 8.25 $ 10.35 $ 10.69
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net Assets $ 384,727 $ 3,393,507 $ 540,515 $ 532,835 $ 117,382 $ 76,927
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue,
unlimited number of
shares authorized 37,057 320,343 53,756 66,574 11,790 7,542
- --------------------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 10.38 $ 10.59 $ 10.05 $ 8.00 $ 9.96 $ 10.20
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Net Assets $482,678,999 $1,101,893,572 $234,971,752 $ 94,543,563 $81,843,055 $49,150,340
Shares of beneficial in-
terest issued and out-
standing, $0.10 par val-
ue,
unlimited number of
shares authorized 46,067,858 104,010,884 23,159,164 11,806,548 8,239,376 4,780,481
- --------------------------------------------------------------------------------------------------------------------------
Net asset value per
share $ 10.48 $ 10.59 $ 10.15 $ 8.01 $ 9.93 $ 10.28
- --------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET AS-
SETS:
Shares of beneficial in-
terest, at par $ 5,014,802 $ 11,618,094 $ 2,367,983 $ 1,285,258 $ 890,093 $ 484,382
Additional paid-in capi-
tal 515,643,984 1,186,542,407 236,650,188 97,719,499 92,268,285 48,686,230
Accumulated undistrib-
uted net investment in-
come 110,888 215,233 39,660 82,943 97,593 25,730
Accumulated undistrib-
uted net realized gains
(losses) (8,520,123) (22,599,705) 90,495 (23,724) (23,677) (7,969)
Net unrealized apprecia-
tion on investments 13,157,252 55,026,536 1,102,211 3,844,815 3,771,444 608,641
Net unrealized deprecia-
tion of assets and lia-
bilities denominated in
foreign
currencies and financial
futures -- -- -- -- (8,624,057) --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $525,406,803 $1,230,802,565 $240,250,537 $102,908,791 $88,379,681 $49,797,014
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Maximum sales charge is 1.00% of Maximum Offering Price per share
(2)Maximum sales charge is 4.50% of Maximum Offering Price per share.
(3)Maximum sales charge is 3.00% of Maximum Offering Price per share.
See accompanying Notes to Financial Statements.
Pegasus Funds
44
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MICHIGAN
MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND
---------------------------
<S> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $360,198,033 $371,559,402 $76,080,729
- -------------------------------------------------------------------------------
At value (Note 2) $385,574,115 $390,339,008 $80,250,061
Receivable for fund shares sold 138,940 -- --
Income receivable 6,482,184 6,877,273 965,322
Deferred organization costs, net (Note
2) 3,534 22,284 --
Prepaids and other assets 121,210 3,227 27,575
- -------------------------------------------------------------------------------
TOTAL ASSETS 392,319,983 397,241,792 81,242,958
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 249,027 78,650 18,125
Accrued investment advisory fees 102,072 132,731 27,040
Accrued transfer and dividend disbursing
agent fees 2,271 2,317 1,869
Accrued custodial fees 3,764 3,767 1,076
Administration fees payable 44,542 48,845 10,140
Shareholder services fees payable (Class
A Shares) 7,256 4,146 3,956
Shareholder services fees payable (Class
B Shares) 254 165 102
12b-1 fees payable (Class B Shares) 729 565 305
Dividends payable 55,017 23,901 17,395
Payable for fund shares redeemed 50 -- --
Other payables and accrued expenses -- 4,203 --
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 464,982 299,290 80,008
- -------------------------------------------------------------------------------
NET ASSETS $391,855,001 $396,942,502 $81,162,950
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
Pegasus Funds
45
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MICHIGAN
MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND
---------------------------
<S> <C> <C> <C>
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Net Assets $ 34,728,537 $ 18,902,884 $18,687,389
Shares of beneficial interest is-
sued and outstanding, $0.10 par
value, unlimited number of shares
authorized 2,699,219 1,533,724 1,709,611
- -------------------------------------------------------------------------------
Net asset value per share $ 12.87 $ 12.32 $ 10.93
Maximum sales charge per share(/1/) 0.61 0.38(2) 0.52
- -------------------------------------------------------------------------------
Maximum offering price per share $ 13.48 $ 12.70 $ 11.45
- -------------------------------------------------------------------------------
CLASS B SHARES:
Net Assets $ 1,312,385 $ 708,808 $ 707,359
Shares of beneficial interest is-
sued and outstanding, $0.10 par
value, unlimited number of shares
authorized 102,087 57,554 66,813
- -------------------------------------------------------------------------------
Net asset value per share $ 12.86 $ 12.32 $ 10.59
- -------------------------------------------------------------------------------
CLASS I SHARES:
Net Assets $355,814,079 $377,330,810 $61,768,202
Shares of beneficial interest is-
sued and outstanding, $0.10 par
value, unlimited number of shares
authorized 27,674,363 30,602,829 5,651,477
- -------------------------------------------------------------------------------
Net asset value per share $ 12.86 $ 12.33 $ 10.93
- -------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at
par $ 3,047,567 $ 3,219,411 $ 742,790
Additional paid-in capital 362,972,334 374,573,674 76,417,414
Accumulated undistributed net in-
vestment income 766,395 367,568 100,955
Accumulated undistributed net real-
ized gains (losses) (307,377) 2,243 (267,541)
Net unrealized appreciation on in-
vestments 25,376,082 18,779,606 4,169,332
- -------------------------------------------------------------------------------
TOTAL NET ASSETS $391,855,001 $396,942,502 $81,162,950
- -------------------------------------------------------------------------------
</TABLE>
(1) Maximum sales charges are 4.50% of Maximum Offering Price per share unless
otherwise noted.
(2) Maximum sales charge is 3.00% of Maximum Offering Price per share.
See accompanying Notes to Financial Statements.
Pegasus Funds
46
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS MANAGED ASSETS MANAGED ASSETS EQUITY GROWTH MID-CAP
CONSERVATIVE FUND BALANCED FUND GROWTH FUND INCOME FUND FUND OPPORTUNITY FUND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE
2)
Interest $ 4,247,793 $ 6,949,595 $111,297 $ 2,329,500 $ 459,636 $ 1,490,210
Dividends 411,914 1,456,843 45,782 9,953,413 5,388,543 6,468,939
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,659,707 8,406,438 157,079 12,282,913 5,848,179 7,959,149
- -------------------------------------------------------------------------------------------------------------------
EXPENSES (NOTES 2, 3 AND
5):
Investment advisory
fees 608,622 1,384,326 35,036 1,594,129 3,641,754 5,355,678
Administration fees 140,451 319,460 8,085 478,239 910,438 1,338,920
Shareholder services
fees (Class A Shares) 190,392 215,488 5,385 33,570 99,549 373,129
Shareholder services
fees (Class B Shares) 21,977 12,011 5,817 5,547 2,917 3,935
12b-1 fees (Class B
Shares) 65,931 36,033 17,451 16,641 9,894 11,805
Professional fees 25,520 30,698 23,089 40,001 31,968 48,919
Custodian fees 22,879 81,364 24,190 55,265 38,606 94,949
Transfer and dividend
disbursing agent fees 161,747 412,034 6,445 28,079 143,911 568,167
Amortization of
deferred organization
costs 18,250 9,434 -- 15,330 14,965 --
Registration, filing
fees and other expenses 39,795 35,242 12,648 20,982 53,369 87,504
Less: Expense
reimbursement (85,184) (172,146) (56,116) -- -- --
- -------------------------------------------------------------------------------------------------------------------
NET EXPENSES 1,210,380 2,363,944 82,030 2,287,783 4,947,371 7,883,006
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,449,327 6,042,494 75,049 9,995,130 900,808 76,143
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains on:
Investment transactions 10,320,662 34,007,379 655,347 49,970,226 38,532,531 75,611,514
Net change in unrealized
appreciation
(depreciation) on:
Investment securities (2,350,245) (7,432,886) (8,420) 3,000,172 104,439,823 143,184,993
- -------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAINS ON
INVESTMENTS 7,970,417 26,574,493 646,927 52,970,398 142,972,354 218,796,507
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $11,419,744 $32,616,987 $721,976 $62,965,528 $143,873,162 $218,872,650
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
47
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL-CAP INTRINSIC VALUE GROWTH & VALUE EQUITY INDEX INTERNATIONAL
OPPORTUNITY FUND FUND FUND FUND EQUITY FUND
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE
2)
Interest $ 341,062 $ 3,169,867 $ 1,413,596 $ 109,762 $ 1,924,127
Dividends 574,637 10,260,968 15,096,038 13,353,788 8,150,756*
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 915,699 13,430,835 16,509,634 13,463,550 10,074,883
- ----------------------------------------------------------------------------------------------------
EXPENSES (NOTES 2, 3 AND
5):
Investment advisory
fees 1,283,658 2,987,206 5,632,896 760,869 3,752,409
Administration fees 275,070 746,802 1,408,224 1,141,303 703,577
Shareholder services
fees (Class A Shares) 30,251 120,837 252,785 253,701 46,711
Shareholder services
fees (Class B Shares) 1,543 3,402 5,286 1,931 3,378
12b-1 fees (Class B
Shares) 5,247 10,205 15,857 5,793 10,134
Professional fees 28,373 36,511 49,822 50,035 44,225
Custodian fees 29,848 54,924 94,006 110,947 464,416
Transfer and dividend
disbursing agent fees 26,152 177,390 494,618 349,216 38,719
Amortization of de-
ferred organization
costs 14,965 -- -- 2,200 12,551
Registration, filing
fees and other expenses 39,598 37,997 230,820 12,227 126,483
Less: Expense reim-
bursement -- -- (67,597) -- --
- ----------------------------------------------------------------------------------------------------
NET EXPENSES 1,734,705 4,175,274 8,116,717 2,688,222 5,202,603
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
(LOSS) (819,006) 9,255,561 8,392,917 10,775,328 4,872,280
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON IN-
VESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gains
(losses) on:
Investment transactions 23,580,300 51,424,041 83,059,077 137,682,393 (2,611,326)
Foreign currency trans-
actions -- -- -- -- (929,302)
Futures transactions -- -- -- -- (3,824,834)
Net change in unrealized
appreciation on:
Investment securities 23,977,959 49,889,271 139,970,312 69,490,136 21,345,962
Assets and liabilities
denominated in foreign
currencies and finan-
cial futures -- -- -- -- 1,472,625
- ----------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAINS ON
INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 47,558,259 101,313,312 223,029,389 207,172,529 15,453,125
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $46,739,253 $110,568,873 $231,422,306 $217,947,857 $20,325,405
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Net of foreign taxes withheld of $351,500.
See accompanying Notes to Financial Statements.
Pegasus Funds
48
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE SHORT BOND MULTI SECTOR INTERNATIONAL HIGH YIELD
BOND FUND BOND FUND FUND BOND FUND BOND FUND BOND FUND (1)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE
2)
Interest $32,483,439 $ 71,695,112 $12,564,456 $ 9,430,783 $ 4,483,007* $1,438,317
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 32,483,439 71,695,112 12,564,456 9,430,783 4,483,007 1,438,317
- ---------------------------------------------------------------------------------------------------------
EXPENSES (NOTES 2, 3 AND
5):
Investment advisory
fees 1,890,923 4,089,788 712,555 562,165 534,521 114,085
Administration fees 709,096 1,533,671 305,381 210,812 114,545 24,447
Shareholder services
fees (Class A Shares) 62,545 181,257 4,929 20,201 10,170 38
Shareholder services
fees (Class B Shares) 583 3,265 285 1,047 179 19
12b-1 fees (Class B
Shares) 1,750 9,794 856 3,141 536 75
Professional fees 40,275 56,090 29,878 29,587 34,536 19,411
Custodian fees 65,072 111,128 38,088 22,882 92,870 7,226
Transfer and dividend
disbursing agent fees 180,167 317,042 46,792 36,705 12,461 1,061
Amortization of de-
ferred organization
costs -- -- 6,792 9,855 13,769 742
Registration, filing
fees and other expenses 15,704 83,101 46,758 1,553 20,396 30,008
Less: Expense reim-
bursement -- -- (23,532) -- (159,849) (35,717)
- ---------------------------------------------------------------------------------------------------------
NET EXPENSES 2,966,115 6,385,136 1,168,782 897,948 674,134 161,395
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 29,517,324 65,309,976 11,395,674 8,532,835 3,808,873 1,276,922
- ---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------
Net realized gains
(losses) on:
Investment transactions 452,863 800,544 144,722 263,190 1,931 22,645
Foreign currency trans-
actions -- -- -- -- (344,273) --
Net change in unrealized
appreciation (deprecia-
tion) on:
Investment securities 8,278,943 34,887,256 864,560 1,982,422 1,297,046 608,641
Assets and liabilities
denominated in foreign
currencies and finan-
cial futures -- -- -- -- (7,372,880) --
- ---------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAINS (LOSS-
ES) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS 8,731,806 35,687,800 1,009,282 2,245,612 (6,418,176) 631,286
- ---------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM OPER-
ATIONS $38,249,130 $100,997,776 $12,404,956 $10,778,447 $(2,609,303) $1,908,208
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period June 30, 1997 (commencement of operations) through December
31, 1997.
*Net of foreign taxes withheld of $21,338.
See accompanying Notes to Financial Statements.
Pegasus Funds
49
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MICHIGAN
MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND
----------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 2)
Interest $21,137,070 $20,808,712 $3,737,858
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 21,137,070 20,808,712 3,737,858
- -------------------------------------------------------------------------------
EXPENSES (NOTES 2, 3 AND 5):
Investment advisory fees 1,524,196 1,585,083 271,734
Administration fees 571,573 594,406 101,900
Shareholder services fees (Class A
Shares) 77,567 47,300 44,780
Shareholder services fees (Class B
Shares) 2,184 1,626 739
12b-1 fees (Class B Shares) 6,553 4,878 2,218
Professional fees 45,742 48,105 31,025
Custodian fees 39,163 37,002 21,562
Transfer and dividend disbursing agent
fees 42,085 18,260 22,742
Amortization of deferred organization
costs 1,460 11,680 3,284
Registration, filing fees and other ex-
penses 84,032 56,374 46,814
Less: Expense reimbursement -- -- (43,158)
- -------------------------------------------------------------------------------
NET EXPENSES 2,394,555 2,404,714 503,640
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 18,742,515 18,403,998 3,234,218
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on:
Investment transactions 2,051,175 2,007,297 (144,655)
Net change in unrealized appreciation
(depreciation) on:
Investment securities 13,548,913 7,485,364 3,140,469
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON IN-
VESTMENTS 15,600,088 9,492,661 2,995,814
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERA-
TIONS $34,342,603 $27,896,659 $6,230,032
- -------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
50
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS MANAGED ASSETS BALANCED
CONSERVATIVE FUND FUND MANAGED ASSETS GROWTH FUND
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, For the period ended
1997 1996 1997 1996 1997 Dec. 31, 1996(1)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income
(loss) $ 3,449,327 $ 2,249,353 $ 6,042,494 $ 3,706,735 $ 75,049 $ (42)
Net realized gains on
investment transactions 10,320,662 7,593,376 34,007,379 8,885,279 655,347 --
Net change in
unrealized appreciation
(depreciation) on
investment securities (2,350,245) (3,598,969) (7,432,886) 1,454,970 (8,420) 7,546
- ------------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 11,419,744 6,243,760 32,616,987 14,046,984 721,976 7,504
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (2,888,131) (2,065,593) (2,416,016) (425,768) (35,453) --
Class B Shares (264,207) (116,907) (95,876) (9,258) (22,220) --
Class I Shares (251,568) (47,887) (3,393,246) (3,244,172) (14,555) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (3,403,906) (2,230,387) (5,905,138) (3,679,198) (72,228) --
- ------------------------------------------------------------------------------------------------------------------
From realized gains
Class A Shares (9,151,629) (503,438) (11,944,679) (821,598) (76,865) --
Class B Shares (1,158,029) (40,850) (721,797) (21,678) (85,740) --
Class I Shares (912,087) (11,015) (9,490,570) (5,862,553) (20,902) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions
from realized gains (11,221,745) (555,303) (22,157,046) (6,705,829) (183,507) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (14,625,651) (2,785,690) (28,062,184) (10,385,027) (255,735) --
- ------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 56,042,633 24,898,181 186,676,562 56,965,450 12,257,921 678,805
Proceeds from shares
issued in connection
with merger -- -- -- 10,706,448 -- --
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 14,019,019 2,586,607 25,044,722 9,612,196 216,893 --
- ------------------------------------------------------------------------------------------------------------------
70,061,652 27,484,788 211,721,284 77,284,094 12,474,814 678,805
Less: payments for
shares redeemed (28,871,617) (9,869,811) (92,665,003) (44,309,100) (536,321) --
- ------------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from capital share
transactions 41,190,035 17,614,977 119,056,281 32,974,994 11,938,493 678,805
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS 37,984,128 21,073,047 123,611,084 36,636,951 12,404,734 686,309
NET ASSETS:
Beginning of period 76,538,374 55,465,327 130,260,752 93,623,801 686,309 --
- ------------------------------------------------------------------------------------------------------------------
End of period $114,522,502 $76,538,374 $253,871,836 $130,260,752 $13,091,043 $686,309
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
See accompanying Notes to Financial Statements.
Pegasus Funds
51
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME FUND GROWTH FUND MID-CAP OPPORTUNITY FUND
--------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Year Ended Dec. 31,
1997 1996 1997 1996 Dec. 31, 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 9,995,130 $ 10,953,219 $ 900,808 $ 2,845,987 $ 76,143 $ 1,595,621
Net realized gains on
investment transactions 49,970,226 28,916,705 38,532,531 39,693,748 75,611,514 57,875,884
Net change in
unrealized appreciation
on investment securi-
ties 3,000,172 16,384,426 104,439,823 37,068,731 143,184,993 97,381,421
- --------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 62,965,528 56,254,350 143,873,162 79,608,466 218,872,650 156,852,926
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (397,886) (182,781) (9,209) (43,133) -- (104,348)
Class B Shares (50,051) (30,522) -- -- -- (58)
Class I Shares (9,614,170) (10,366,056) (905,808) (2,792,205) (76,268) (1,491,567)
- --------------------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (10,062,107) (10,579,359) (915,017) (2,835,338) (76,268) (1,595,973)
- --------------------------------------------------------------------------------------------------------------
From realized gains
Class A Shares (2,206,498) (620,108) (3,354,983) (978,254) (15,608,413) (6,210,266)
Class B Shares (503,410) (111,649) (110,626) (102,183) (430,754) (10,839)
Class I Shares (54,205,468) (19,435,888) (35,824,761) (35,960,890) (56,800,760) (45,814,909)
- --------------------------------------------------------------------------------------------------------------
Total distributions
from realized gains (56,915,376) (20,167,645) (39,290,370) (37,041,327) (72,839,927) (52,036,014)
- --------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (66,977,483) (30,747,004) (40,205,387) (39,876,665) (72,916,195) (53,631,987)
- --------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 36,443,621 40,669,211 120,290,702 52,488,542 340,892,729 151,712,918
Proceeds from shares
issued in connection
with merger -- -- -- 228,354,666 -- --
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 37,045,422 17,221,331 26,835,283 31,463,299 60,563,640 45,831,569
- --------------------------------------------------------------------------------------------------------------
73,489,043 57,890,542 147,125,985 312,306,507 401,456,369 197,544,487
Less: payments for
shares redeemed (78,967,179) (41,301,635) (165,354,759) (92,806,272) (275,036,455) (182,439,666)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from cap-
ital share transactions (5,478,136) 16,588,907 (18,228,774) 219,500,235 126,419,914 15,104,821
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (9,490,091) 42,096,253 85,439,001 259,232,036 272,376,369 118,325,760
NET ASSETS:
Beginning of period 329,489,780 287,393,527 557,773,382 298,541,346 769,278,028 650,952,268
- --------------------------------------------------------------------------------------------------------------
End of period $319,999,689 $329,489,780 $643,212,383 $557,773,382 $1,041,654,397 $769,278,028
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
52
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL-CAP OPPORTUNITY
FUND INTRINSIC VALUE FUND GROWTH AND VALUE FUND
-----------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Year Ended Dec. 31,
1997 1996 1997 1996 Dec. 31, 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income
(loss) $ (819,006) $ (32,509) $ 9,255,561 $ 6,855,556 $ 8,392,917 $ 9,665,824
Net realized gains on
investment transactions 23,580,300 17,881,429 51,424,041 16,465,095 83,059,077 87,410,523
Net change in
unrealized appreciation
on investment securi-
ties 23,977,959 7,930,344 49,889,271 43,380,316 139,970,312 36,502,219
- --------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 46,739,253 25,779,264 110,568,873 66,700,967 231,422,306 133,578,566
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (10) (10) (824,689) (425,708) (717,201) (611,802)
Class B Shares -- -- (29,657) (689) (13,664) (600)
Class I Shares (90) (3,928) (8,168,777) (6,481,315) (7,818,526) (8,481,780)
- --------------------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (100) (3,938) (9,023,123) (6,907,712) (8,549,391) (9,094,182)
- --------------------------------------------------------------------------------------------------------------
From realized gains
Class A Shares (1,940,280) (556,174) (5,568,447) (1,071,739) (12,290,204) (5,430,328)
Class B Shares (140,872) (8,638) (275,342) (6,170) (544,023) (15,316)
Class I Shares (21,480,150) (12,459,929) (38,037,383) (16,413,883) (78,740,173) (66,935,481)
- --------------------------------------------------------------------------------------------------------------
Total distributions
from realized gains (23,561,302) (13,024,741) (43,881,172) (17,491,792) (91,574,400) (72,381,125)
- --------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (23,561,402) (13,028,679) (52,904,295) (24,399,504) (100,123,791) (81,475,307)
- --------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 96,892,647 33,354,228 253,810,170 128,545,740 345,503,243 142,799,001
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 13,802,550 7,971,106 42,141,699 21,568,282 71,311,316 67,584,671
- --------------------------------------------------------------------------------------------------------------
110,695,197 41,325,334 295,951,869 150,114,022 416,814,559 210,383,672
Less: payments for
shares redeemed (24,978,895) (15,040,778) (107,487,017) (68,388,827) (277,887,120) (206,812,138)
- --------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from capital share
transactions 85,716,302 26,284,556 188,464,852 81,725,195 138,927,439 3,571,534
- --------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS 108,894,153 39,035,141 246,129,430 124,026,658 270,225,954 55,674,793
NET ASSETS:
Beginning of period 132,648,084 93,612,943 379,911,517 255,884,859 792,841,860 737,167,067
- --------------------------------------------------------------------------------------------------------------
End of period $241,542,237 $132,648,084 $626,040,947 $379,911,517 $1,063,067,814 $792,841,860
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
53
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INDEX FUND INTERNATIONAL EQUITY FUND
-----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1997 December 31, 1996
-----------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 10,775,328 $ 14,823,298 $ 4,872,280 $ 2,474,079
Net realized gains
(losses) on investment
and foreign currency
transactions 137,682,393 16,222,665 (7,365,462) (1,496,221)
Net change in
unrealized appreciation
on investment securi-
ties and foreign cur-
rency translation 69,490,136 119,756,862 22,818,587 17,747,087
- ------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 217,947,857 150,802,825 20,325,405 18,724,945
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (1,287,874) (232,541) (158,687) (29,678)
Class B Shares (13,913) (467) (7,361) (3,888)
Class I Shares (9,815,475) (14,255,449) (4,474,343) (2,296,031)
- ------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (11,117,262) (14,488,457) (4,640,391) (2,329,597)
- ------------------------------------------------------------------------------------------------
From realized gains
Class A Shares (4,544,532) (524,957) -- --
Class B Shares (59,025) (1,276) -- --
Class I Shares (17,429,544) (12,759,806) -- --
- ------------------------------------------------------------------------------------------------
Total distributions
from realized gains (22,033,101) (13,286,039) -- --
- ------------------------------------------------------------------------------------------------
Total distributions to
shareholders (33,150,363) (27,774,496) (4,640,391) (2,329,597)
- ------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 315,400,643 430,581,095 163,775,810 161,993,251
Proceeds from shares
issued in connection
with merger -- -- 25,851,101 144,968,119
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 22,770,868 25,322,886 1,647,758 1,196,154
- ------------------------------------------------------------------------------------------------
338,171,511 455,903,981 191,274,669 308,157,524
Less: payments for
shares redeemed (557,739,568) (237,318,573) (92,471,044) (29,876,945)
- ------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from cap-
ital share transactions (219,568,057) 218,585,408 98,803,625 278,280,579
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (34,770,563) 341,613,737 114,488,639 294,675,927
NET ASSETS:
Beginning of period 869,816,650 528,202,913 401,964,228 107,288,301
- ------------------------------------------------------------------------------------------------
End of period $ 835,046,087 $869,816,650 $516,452,867 $401,964,228
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
54
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND BOND FUND SHORT BOND FUND
------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 29,517,324 $ 24,856,790 $ 65,309,976 $ 40,606,005 $ 11,395,674 $ 9,102,945
Net realized gains on
investments 452,863 1,800,673 800,544 4,524,736 144,722 480,231
Net change in
unrealized appreciation
(depreciation) on in-
vestment securities 8,278,943 (4,413,650) 34,887,256 (10,189,588) 864,560 (2,046,522)
- ------------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 38,249,130 22,243,813 100,997,776 34,941,153 12,404,956 7,536,654
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (1,482,724) (767,604) (4,500,480) (2,223,311) (104,124) (43,710)
Class B Shares (12,737) (1,022) (73,502) (5,666) (5,587) (375)
Class I Shares (27,921,135) (24,369,891) (60,755,009) (38,376,142) (11,327,998) (9,042,643)
- ------------------------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (29,416,596) (25,138,517) (65,328,991) (40,605,119) (11,437,709) (9,086,728)
- ------------------------------------------------------------------------------------------------------------------
From realized gains
Class A Shares -- -- -- -- (1,700) (2,475)
Class B Shares -- -- -- -- (150) (119)
Class I Shares -- -- -- -- (167,344) (402,873)
- ------------------------------------------------------------------------------------------------------------------
Total distributions
from realized gains -- -- -- -- (169,194) (405,467)
- ------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (29,416,596) (25,138,517) (65,328,991) (40,605,119) (11,606,903) (9,492,195)
- ------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 213,559,882 118,511,852 525,891,556 228,866,516 136,214,007 41,032,559
Proceeds from shares
issued in connection
with merger -- -- -- 130,865,901 -- --
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 17,877,864 19,192,374 36,740,089 29,585,134 4,626,060 3,975,394
- ------------------------------------------------------------------------------------------------------------------
231,437,746 137,704,226 562,631,645 389,317,551 140,840,067 45,007,953
Less: payments for
shares redeemed (128,414,182) (126,568,756) (172,381,516) (96,335,513) (73,903,614) (33,873,236)
- ------------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from capital share
transactions 103,023,564 11,135,470 390,250,129 292,982,038 66,936,453 11,134,717
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS 111,856,098 8,240,766 425,918,914 287,318,072 67,734,506 9,179,176
NET ASSETS:
Beginning of period 413,550,705 405,309,939 804,883,651 517,565,579 172,516,031 163,336,855
- ------------------------------------------------------------------------------------------------------------------
End of period $ 525,406,803 $ 413,550,705 $1,230,802,565 $804,883,651 $240,250,537 $172,516,031
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
55
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD
MULTI SECTOR BOND FUND INTERNATIONAL BOND FUND BOND FUND
----------------------------------------------
Period
Year Ended Year Ended Year Ended Ended
Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Dec. 31, 1997 1996 1997 1996 1997(1)
----------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 8,532,835 $ 12,243,298 $ 3,808,873 $ 1,588,432 $ 1,276,922
Net realized gains
(losses) on investments
and foreign currency
transactions 263,190 (21,631) (342,342) 255,095 22,645
Net change in
unrealized appreciation
(depreciation) on in-
vestment securities and
foreign
currency translation 1,982,422 (5,355,005) (6,075,834) 651,325 608,641
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from op-
erations 10,778,447 6,866,662 (2,609,303) 2,494,852 1,908,208
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (482,924) (430,827) (175,385) (48,371) (5,259)
Class B Shares (22,582) (22,400) (2,562) (540) (955)
Class I Shares (8,031,340) (11,703,117) (3,213,081) (1,719,814) (1,244,978)
- --------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (8,536,846) (12,156,344) (3,391,028) (1,768,725) (1,251,192)
- --------------------------------------------------------------------------------------------
From realized gains
Class A Shares (18,808) (92,572) (1,440) -- (127)
Class B Shares (1,207) (5,831) (25) -- (20)
Class I Shares (230,025) (2,526,588) (23,686) -- (22,498)
- --------------------------------------------------------------------------------------------
Total distributions
from realized gains (250,040) (2,624,991) (25,151) -- (22,645)
- --------------------------------------------------------------------------------------------
Distributions in excess
of realized gains
Class A Shares -- -- -- -- (45)
Class B Shares -- -- -- -- (7)
Class I Shares -- -- -- -- (7,917)
- --------------------------------------------------------------------------------------------
Total distributions in
excess of realized
gains -- -- -- -- (7,969)
- --------------------------------------------------------------------------------------------
Total distributions to
shareholders (8,786,886) (14,781,335) (3,416,179) (1,768,725) (1,281,806)
- --------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 10,311,300 61,836,745 45,230,134 42,220,702 50,855,077
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 724,616 2,635,130 1,766,090 843,217 373,896
- --------------------------------------------------------------------------------------------
11,035,916 64,471,875 46,996,224 43,063,919 51,228,973
Less: payments for
shares redeemed (106,530,429) (58,429,130) (8,488,101) (2,888,294) (2,058,361)
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from cap-
ital share transactions (95,494,513) 6,042,745 38,508,123 40,175,625 49,170,612
- --------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (93,502,952) (1,871,928) 32,482,641 40,901,752 49,797,014
NET ASSETS:
Beginning of period 196,411,743 198,283,671 55,897,040 14,995,288 --
- --------------------------------------------------------------------------------------------
End of period $ 102,908,791 $196,411,743 $88,379,681 $55,897,040 $49,797,014
- --------------------------------------------------------------------------------------------
</TABLE>
(1)For the period June 30, 1997 (commencement of operations) through December
31, 1997.
See accompanying Notes to Financial Statements.
Pegasus Funds
56
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MUNICIPAL BOND MICHIGAN MUNICIPAL BOND
MUNICIPAL BOND FUND FUND FUND
---------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 18,742,515 $ 13,312,581 $ 18,403,998 $ 18,092,497 $ 3,234,218 $ 2,575,994
Net realized gains
(losses) on investments 2,051,175 2,185,933 2,007,297 2,576,883 (144,655) (90,124)
Net change in
unrealized appreciation
(depreciation) on in-
vestment securities 13,548,913 (3,444,888) 7,485,364 (5,510,989) 3,140,469 (530,540)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from operations 34,342,603 12,053,626 27,896,659 15,158,391 6,230,032 1,955,330
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS (NOTE 2):
From net investment in-
come
Class A Shares (1,484,220) (535,878) (839,467) (761,652) (814,513) (868,350)
Class B Shares (35,945) (15,695) (24,367) (16,784) (13,084) (702)
Class I Shares (17,510,743) (11,706,220) (17,763,309) (16,723,347) (2,398,650) (1,615,892)
- ----------------------------------------------------------------------------------------------------------------
Total distributions
from net investment in-
come (19,030,908) (12,257,793) (18,627,143) (17,501,783) (3,226,247) (2,484,944)
- ----------------------------------------------------------------------------------------------------------------
From realized gains
Class A Shares -- (6,075) (99,588) (112,133) -- --
Class B Shares -- (394) (3,661) (3,569) -- --
Class I Shares -- (201,402) (1,949,447) (2,341,621) -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions
from realized gains -- (207,871) (2,052,696) (2,457,323) -- --
- ----------------------------------------------------------------------------------------------------------------
Distributions in excess
of realized gains
Class A Shares -- (101,301) -- -- -- --
Class B Shares -- (6,561) -- -- -- --
Class I Shares -- (3,358,322) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions in
excess of realized
gains -- (3,466,184) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (19,030,908) (15,931,848) (20,679,839) (19,959,106) (3,226,247) (2,484,944)
- ----------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 103,257,906 56,407,627 72,832,224 65,174,176 26,314,714 17,373,469
Proceeds from shares
issued in connection
with merger -- 102,578,100 -- -- -- --
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 1,503,756 2,868,722 2,436,698 2,546,519 987,581 854,735
- ----------------------------------------------------------------------------------------------------------------
104,761,662 161,854,449 75,268,922 67,720,695 27,302,295 18,228,204
Less: payments for
shares redeemed (96,346,798) (37,670,935) (79,173,261) (61,160,676) (9,736,804) (10,558,076)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from cap-
ital share transactions 8,414,864 124,183,514 (3,904,339) 6,560,019 17,565,491 7,670,128
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS 23,726,559 120,305,292 3,312,481 1,759,304 20,569,276 7,140,514
NET ASSETS:
Beginning of period 368,128,442 247,823,150 393,630,021 391,870,717 60,593,674 53,453,160
- ----------------------------------------------------------------------------------------------------------------
End of period $391,855,001 $368,128,442 $396,942,502 $393,630,021 $81,162,950 $60,593,674
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds
57
<PAGE>
PEGASUS MANAGED ASSETS CONSERVATIVE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 1.99%
Pegasus Cash Management Fund Class I.................. 2,277,288 $ 2,277,288
------------
(Cost $2,277,288)
MUTUAL FUNDS -- 98.01%
Pegasus Bond Fund...................................... 4,537,028 48,047,128
Pegasus International Bond Fund........................ 1,033,931 10,266,933
Pegasus High Yield Bond Fund........................... 998,729 10,266,934
Pegasus Growth Fund.................................... 154,867 2,335,393
Pegasus Growth and Value Fund.......................... 838,187 13,737,888
Pegasus International Equity Fund...................... 752,430 9,134,500
Pegasus Intrinsic Value Fund........................... 730,256 11,443,109
Pegasus Mid-Cap Opportunity Fund ...................... 221,530 4,636,618
Pegasus Small-Cap Opportunity Fund..................... 144,244 2,339,647
------------
TOTAL MUTUAL FUNDS
(Cost $109,889,357).................................... 112,208,150
------------
TOTAL INVESTMENTS....................................... $114,485,438
============
(Cost $112,166,645)
</TABLE>
See Notes to Financial Statements
Pegasus Funds
58
<PAGE>
PEGASUS MANAGED ASSETS BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 2.99%
Pegasus Cash Management Fund Class I.................. 7,582,964 $ 7,582,964
------------
(Cost $7,582,964)
MUTUAL FUNDS -- 97.01%
Pegasus Bond Fund...................................... 6,703,435 70,989,381
Pegasus Growth Fund.................................... 513,008 7,736,160
Pegasus Growth and Value Fund.......................... 2,788,521 45,703,855
Pegasus High Yield Bond Fund........................... 1,473,686 15,149,489
Pegasus International Bond Fund........................ 1,525,628 15,149,489
Pegasus International Equity Fund...................... 2,504,952 30,410,117
Pegasus Intrinsic Value Fund........................... 2,424,941 37,998,826
Pegasus Mid-Cap Opportunity Fund ...................... 733,682 15,355,970
Pegasus Small-Cap Opportunity Fund..................... 477,277 7,741,440
------------
TOTAL MUTUAL FUNDS...................................... 246,234,727
------------
(Cost $241,394,978)
TOTAL INVESTMENTS....................................... $253,817,691
============
(Cost $248,977,942)
</TABLE>
See Notes to Financial Statements
Pegasus Funds
59
<PAGE>
PEGASUS MANAGED ASSETS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
----------- ------ ------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 3.85%
Pegasus Cash Management Fund Class I..................... 501,221 $ 501,221
-----------
(Cost $501,221)
MUTUAL FUNDS -- 96.15%
Pegasus Bond Fund......................................... 172,170 1,823,281
Pegasus Growth Fund....................................... 34,544 520,938
Pegasus Growth and Value Fund............................. 190,703 3,125,625
Pegasus High Yield Bond Fund.............................. 38,006 390,703
Pegasus International Bond Fund........................... 39,346 390,703
Pegasus International Equity Fund......................... 172,881 2,098,769
Pegasus Intrinsic Value Fund.............................. 166,221 2,604,687
Pegasus Mid-Cap Opportunity Fund.......................... 49,779 1,041,875
Pegasus Small-Cap Opportunity Fund........................ 32,117 520,937
-----------
TOTAL MUTUAL FUNDS......................................... 12,517,518
-----------
(Cost $12,518,392)
TOTAL INVESTMENTS.......................................... $13,018,739
===========
(Cost $13,019,613)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
60
<PAGE>
PEGASUS EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION FACE AMOUNT VALUE
----------- ----------- ------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 6.67%
Salomon Brothers, Revolving Repurchase Agreement,
6.625%, 1/2/98 (secured by U.S. Treasury Notes with
maturities ranging from 7/15/98 through 2/28/02 at
various interest rates ranging from 6.25% to 8.25%,
all held at Chase Bank).............................. $ 8,545,629 $ 8,545,629
Pegasus Cash Management Fund Class I (in shares)...... 12,740,160 12,740,160
-----------
(Cost $21,285,789).................................... 21,285,789
-----------
CONVERTIBLE BONDS -- 9.73%
Enserch Corp., 6.375%, 4/1/02......................... 1,610,000 1,734,775
NAC RE Corp., 5.25%, 12/15/02......................... 3,095,000 3,505,088
Pep Boys, Zero Coupon, 9/20/11........................ 3,272,700 1,750,894
Potomac Electric Power, 5.00%, 9/1/02................. 10,294,000 10,100,988
Roche Holding Inc., Zero Coupon, 5/6/12............... 30,100,000 13,958,875
-----------
(Cost $29,136,373).................................... 31,050,620
-----------
<CAPTION>
SHARES
------
<S> <C> <C>
NON-CONVERTIBLE PREFERRED STOCKS -- 4.50%
FINANCE -- 4.50%
Salomon, Inc., 7.625%................................ 356,900 14,365,225
-----------
(Cost $9,930,110)
COMMON STOCKS -- 79.10%
AEROSPACE -- 2.89%
Lockheed Martin Corp................................. 93,600 9,219,600
-----------
BANKS -- 3.17%
Mercantile Bankshares Corp........................... 100,000 3,912,500
Pacific Century Financial Corp....................... 250,000 6,187,500
-----------
10,100,000
-----------
CHEMICALS -- 5.48%
Dow Chemical Co...................................... 100,000 10,150,000
NCH Corp............................................. 111,900 7,329,450
-----------
17,479,450
-----------
CONSUMER DURABLES -- 0.87%
National Presto Industries, Inc...................... 69,900 2,765,419
-----------
DOMESTIC OIL -- 2.26%
Atlantic Richfield Co................................ 90,200 7,227,275
-----------
DRUGS AND MEDICINE -- 1.54%
Mid Ocean LTD........................................ 90,600 4,915,050
-----------
ENERGY AND UTILITIES -- 8.51%
CINergy Corp......................................... 130,000 4,980,625
Connecticut Energy Corp.............................. 162,400 4,892,300
Empire District Electric............................. 4,500 88,313
Sierra Pacific Resources............................. 104,000 3,900,000
SJW Corp............................................. 10,000 605,000
Southwest Gas Corp................................... 179,000 3,345,062
Washington Water Power Co............................ 383,700 9,328,706
-----------
27,140,006
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
61
<PAGE>
PEGASUS EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
----------- ------ ------
<S> <C> <C>
FOOD AND AGRICULTURE -- 2.76%
Tate & Lyle PLC Sponsored................................. 266,700 $8,811,635
----------
INSURANCE -- 11.42%
American National Insurance Co............................ 107,750 10,020,750
Ohio Casualty Corp........................................ 191,600 8,550,150
Old Republic International Corp........................... 328,650 12,221,672
RLI Corp.................................................. 35,200 1,753,400
SAFECO Corp............................................... 79,600 3,880,500
----------
36,426,472
----------
INTERNATIONAL OIL -- 6.33%
Amoco Corp................................................ 74,700 6,358,838
Mobil Corp................................................ 99,200 7,161,000
Texaco, Inc............................................... 122,600 6,666,375
----------
20,186,213
----------
MISCELLANEOUS AND CONGLOMERATES -- 3.12%
Diageo PLC................................................ 263,000 9,961,125
----------
MISCELLANEOUS FINANCE -- 5.48%
Associated Estates Realty................................. 139,700 3,309,144
Federal National Mortgage Association..................... 248,600 14,185,737
----------
17,494,881
----------
MOTOR VEHICLES -- 2.24%
Ford Motor Co............................................. 146,800 7,147,325
----------
NON-DURABLES AND ENTERTAINMENT -- 5.30%
Hasbro, Inc............................................... 154,000 4,851,000
Luby's Cafeterias, Inc.................................... 313,600 5,507,600
Sbarro, Inc............................................... 248,500 6,538,656
----------
16,897,256
----------
NON-FERROUS METALS -- 1.17%
Phelps Dodge Corp......................................... 60,000 3,735,000
----------
RAILROADS AND SHIPPING -- 4.60%
Alexander & Baldwin, Inc.................................. 280,500 7,661,156
Illinois Central Corp., Series A.......................... 206,300 7,027,094
----------
14,688,250
----------
REAL PROPERTY -- 0.98%
Amli Residential Properties Trust......................... 140,000 3,115,000
----------
RETAIL -- 2.78%
May Department Stores..................................... 72,500 3,819,843
Stanhome, Inc. VTG........................................ 196,200 5,039,888
----------
8,859,731
----------
TIRES AND RUBBER GOODS -- 2.21%
Bandag, Inc., Class A..................................... 147,500 7,061,562
----------
</TABLE>
See Notes to Financial Statements
Pegasus Funds
62
<PAGE>
PEGASUS EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TOBACCO -- 5.99%
Loews Corp.............................................. 71,600 $ 7,598,550
Philip Morris Companies, Inc............................ 119,800 5,428,437
UST, Inc................................................ 164,400 6,072,525
------------
19,099,512
------------
TOTAL COMMON STOCKS....................................... 252,330,762
------------
(Cost $197,697,767)
TOTAL INVESTMENTS......................................... $319,032,396
============
(Cost $258,050,039)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
63
<PAGE>
PEGASUS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
----------- ------ ------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.88%
Pegasus Cash Management Fund Class I.................... 5,639,483 $ 5,639,483
-----------
(Cost $5,639,483)
COMMON STOCKS -- 99.12%
BANKS -- 6.65%
Norwest Corp........................................... 500,000 19,312,500
MBNA Corp.............................................. 390,000 10,651,875
State Street Boston Corp............................... 220,000 12,801,250
-----------
42,765,625
-----------
BUSINESS MACHINES -- 9.42%
Cisco System, Inc.*.................................... 255,000 14,216,250
Microsoft Corp.*....................................... 220,000 28,435,000
Silicon Graphics*...................................... 475,000 5,907,813
Sun Microsystems, Inc.................................. 300,000 11,962,500
-----------
60,521,563
-----------
BUSINESS SERVICES -- 6.97%
Cendent Corp.*......................................... 220,000 7,562,500
Computer Associates International, Inc................. 315,000 16,655,625
First Data Corp........................................ 270,000 7,897,500
Interpublic Group of Companies, Inc.................... 255,000 12,702,188
-----------
44,817,813
-----------
CHEMICALS -- 1.54%
Praxair, Inc........................................... 220,000 9,900,000
-----------
CONSTRUCTION -- 1.16%
Fluor Corp............................................. 200,000 7,475,000
-----------
CONSUMER DURABLES -- 2.08%
Newell Co.............................................. 315,000 13,387,500
-----------
DRUGS AND MEDICINE -- 17.66%
American Home Products Corp............................ 100,000 7,650,000
Amgen, Inc.*........................................... 210,000 11,366,250
Guidant Corp........................................... 170,000 10,582,500
Johnson & Johnson...................................... 200,000 13,175,000
Mylan Laboratories, Inc................................ 430,000 9,003,125
Pall Corp.............................................. 275,000 5,689,062
Pfizer, Inc............................................ 225,000 16,776,562
Smithkline Beecham PLC ADR............................. 400,000 20,575,000
Stryker Corp........................................... 181,400 6,757,150
United Healthcare Corp................................. 240,000 11,925,000
-----------
113,499,649
-----------
ELECTRONICS -- 6.77%
Altera Corp.*.......................................... 325,000 10,765,625
Intel Corp............................................. 305,000 21,426,250
Lucent Technologies, Inc............................... 141,600 11,310,300
-----------
43,502,175
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
64
<PAGE>
PEGASUS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
ENERGY AND UTILITIES -- 3.35%
AES Corp.*.............................................. 315,000 $ 14,686,875
Enron Corp.............................................. 165,000 6,857,812
------------
21,544,687
------------
ENERGY RAW MATERIALS -- 3.80%
Schlumberger, Ltd....................................... 90,000 7,245,000
Unova, Inc.*............................................ 190,000 3,123,125
Western Atlas, Inc.*.................................... 190,000 14,060,000
------------
24,428,125
------------
FOOD AND AGRICULTURE -- 1.42%
PepsiCo, Inc............................................ 250,000 9,109,375
------------
INSURANCE -- 4.81%
AFLAC, Inc.............................................. 200,000 10,225,000
Unum Corp............................................... 380,000 20,662,500
------------
30,887,500
------------
MEDIA -- 1.00%
Cabletron System, Inc................................... 430,000 6,450,000
------------
MISCELLANEOUS & CONGLOMERATES -- 2.87%
Elan PLC ADR*........................................... 360,000 18,427,500
------------
MISCELLANEOUS FINANCE -- 2.65%
Federal Home Loan Mortgage Corp......................... 200,000 8,387,500
MGIC Investment Corp.................................... 130,000 8,645,000
------------
17,032,500
------------
NON-DURABLES AND ENTERTAINMENT -- 2.99%
Service Corp. International............................. 520,000 19,207,500
------------
PRODUCER GOODS -- 3.04%
Illinois Tool Works, Inc................................ 325,000 19,540,625
------------
RETAIL -- 8.32%
Dollar General Corp..................................... 300,000 10,875,000
Home Depot, Inc......................................... 390,000 22,961,250
Officemax, Inc.*........................................ 500,000 7,125,000
Walgreen Co............................................. 400,000 12,550,000
------------
53,511,250
------------
SOAPS AND COSMETICS -- 2.17%
Procter & Gamble Co..................................... 175,000 13,967,187
------------
TELEPHONE -- 3.01%
AirTouch Communications, Inc.*.......................... 465,000 19,326,563
------------
TOBACCO -- 2.11%
Philip Morris Companies, Inc............................ 300,000 13,593,750
------------
TRAVEL AND RECREATION -- 5.33%
Carnival Corp. Class A.................................. 395,000 21,873,125
Disney (Walt) Co........................................ 125,000 12,382,813
------------
34,255,938
------------
TOTAL COMMON STOCKS....................................... 637,151,825
------------
(Cost $406,160,915)
TOTAL INVESTMENTS......................................... $642,791,308
============
(Cost $411,800,398)
</TABLE>
* Non-income producing security
See Notes to Financial Statements.
Pegasus Funds
65
<PAGE>
PEGASUS MID-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 3.12%
Pegasus Cash Management Fund Class I................ 32,773,742 $ 32,773,742
------------
(Cost $32,773,742)
COMMON STOCKS -- 96.88%
AIR TRANSPORT -- 1.08%
Air Express International Corp. .................... 371,892 11,342,706
------------
APPAREL -- 0.86%
Tommy Hilfiger Corp................................. 258,652 9,085,151
------------
BANKS -- 8.33%
Associated Banc Corp................................ 336,602 18,555,185
Charter One Financial, Inc.......................... 459,615 29,013,197
First Tennessee National Corp....................... 175,138 11,690,462
TCF Financial Corp.................................. 830,220 28,175,591
------------
87,434,435
------------
BUSINESS MACHINES -- 4.56%
Comdisco, Inc....................................... 469,898 15,712,214
Diebold, Inc........................................ 240,533 12,176,983
Stratus Computer Inc................................ 278,900 10,545,906
Xilinx, Inc.*....................................... 267,572 9,381,743
------------
47,816,846
------------
BUSINESS SERVICES -- 8.64%
CDI Corp............................................ 384,342 17,583,646
DST Systems, Inc.*.................................. 468,767 20,010,491
Hon Industries, Inc................................. 330,000 19,470,000
Omnicom Group, Inc.................................. 282,496 11,970,768
Sungard Data Systems, Inc........................... 699,092 21,671,852
------------
90,706,757
------------
CHEMICALS -- 0.71%
RPM, Inc............................................ 490,233 7,476,053
------------
CONSTRUCTION -- 4.13%
Applied Power, Inc.................................. 250,000 17,250,000
Crane Co............................................ 602,335 26,126,281
------------
43,376,281
------------
CONSUMER DURABLES -- 1.50%
Leggett & Platt, Inc................................ 376,297 15,757,437
------------
CONTAINERS -- 1.51%
AptarGroup, Inc..................................... 286,210 15,884,655
------------
DRUGS AND MEDICINE -- 4.61%
Health Care & Retirement............................ 354,961 14,287,180
Quorum Health Group, Inc.*.......................... 558,384 14,587,782
Sybron International Corp.*......................... 415,541 19,504,456
------------
48,379,418
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
66
<PAGE>
PEGASUS MID-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
ELECTRONICS -- 9.11%
Belden, Inc............................................. 587,927 $ 20,724,427
Dynatech Corp.*......................................... 413,389 19,377,609
Kemet Corp.*............................................ 385,344 7,466,040
Lexmark International................................... 461,100 17,521,800
Microchip Technology, Inc.*............................. 301,322 9,039,660
Molex, Inc. Class A..................................... 417,803 12,011,836
Teradyne, Inc.*......................................... 295,818 9,466,176
------------
95,607,548
------------
ENERGY RAW MATERIALS -- 3.39%
Apache Corp............................................. 505,069 17,708,982
Noble Affiliates, Inc................................... 369,059 13,009,330
Southwestern Energy Co.................................. 376,200 4,843,575
------------
35,561,887
------------
INSURANCE -- 3.42%
Capital Re Corp......................................... 349,536 21,693,078
Transatlantic Holdings, Inc............................. 198,762 14,211,483
------------
35,904,561
------------
MISCELLANEOUS AND CONGLOMERATES -- 8.49%
Camco Inernational, Inc................................. 262,900 16,743,444
Culligan Water Technologies, Inc........................ 171,492 8,617,473
Dentsply International, Inc............................. 421,014 12,840,927
Essex International, Inc................................ 516,900 15,377,775
Health Management Association, Inc. Class A............. 257,767 6,508,617
Littelfuse, Inc.*....................................... 483,280 12,021,590
Water Corp.............................................. 452,900 17,040,363
------------
89,150,189
------------
MISCELLANEOUS FINANCE -- 13.22%
CMAC Investment Corp.................................... 338,508 20,437,421
Edwards (A.G.), Inc..................................... 522,304 20,761,584
Everest Reinsurance Holdings, Inc....................... 556,723 22,964,824
Executive Risk, Inc..................................... 164,099 11,456,161
FINOVA Group, Inc....................................... 521,340 25,904,081
Idex Corp............................................... 447,692 15,613,258
PMI Group, Inc.......................................... 298,591 21,591,862
------------
138,729,191
------------
MOTOR VEHICLES -- 5.52%
Borg Warner Automotive.................................. 363,139 18,883,228
Donaldson C., Inc....................................... 211,500 9,530,719
Harley-Davidson, Inc.................................... 516,496 14,139,078
Tower Automotive, Inc................................... 365,587 15,377,503
------------
57,930,528
------------
NON-DURABLES AND ENTERTAINMENT -- 1.29%
Lancaster Colony Corp................................... 239,925 13,525,772
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
67
<PAGE>
PEGASUS MID-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
NON-FERROUS METALS -- 1.56%
DT Industries, Inc.................................... 480,232 $ 16,327,888
--------------
PRODUCER GOODS -- 5.80%
Harsco Corp........................................... 372,200 16,051,125
Hubbell, Inc. Class B................................. 367,097 18,102,471
Juno Lighting, Inc.................................... 673,076 11,778,830
Teleflex, Inc......................................... 362,192 13,672,748
TriMas Corp........................................... 38,600 1,326,875
--------------
60,932,049
--------------
RETAIL -- 6.42%
Kohls Corp............................................ 181,955 12,395,684
Mens Wearhouse, Inc................................... 382,800 13,302,300
Proffitts, Inc.*...................................... 843,618 23,990,387
Zale Corp.*........................................... 771,952 17,754,896
--------------
67,443,267
--------------
TRAVEL AND RECREATION -- 2.73%
Callaway Golf Co...................................... 484,382 13,835,161
Galileo International, Inc............................ 534,700 14,771,088
--------------
28,606,249
--------------
TOTAL COMMON STOCKS..................................... 1,016,978,868
--------------
(Cost $677,567,103)
TOTAL INVESTMENTS....................................... $1,049,752,610
==============
(Cost $710,340,845)
</TABLE>
*Non-income producing security.
See Notes to Financial Statements.
Pegasus Funds
68
<PAGE>
PEGASUS SMALL-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 2.58%
Pegasus Cash Management Fund Class I................. 6,245,567 $ 6,245,567
------------
(Cost $6,245,567)
COMMON STOCKS -- 97.42%
APPAREL -- 0.93%
Culp, Inc........................................... 112,000 2,240,000
------------
BUSINESS MACHINES -- 4.54%
Boole & Babbage, Inc................................ 105,450 3,150,319
Box Hill Systems Corp............................... 120,000 1,252,500
Cort Business Services Corp.*....................... 130,000 5,175,625
Perceptron, Inc.*................................... 65,000 1,405,625
------------
10,984,069
------------
BUSINESS SERVICES -- 6.31%
Boron Lepore & Associates........................... 105,000 2,887,500
CDI Corp............................................ 84,600 3,870,450
Education Management Corp........................... 94,700 2,935,700
Patterson Dental Co.*............................... 65,000 2,941,250
RemedyTemp, Inc., Class A*.......................... 135,000 2,615,625
------------
15,250,525
------------
CHEMICALS -- 1.31%
Brady (W.H.) Co., Class A........................... 102,000 3,162,000
------------
CONSTRUCTION -- 1.44%
Crossmann Communities, Inc.......................... 126,000 3,480,750
------------
CONTAINERS -- 1.40%
Aptargroup, Inc..................................... 60,800 3,374,400
------------
DOMESTIC OIL -- 1.32%
Coho Energy Resources, Inc.......................... 350,000 3,193,750
------------
DRUGS & MEDICINE -- 5.67%
Arrow International, Inc............................ 115,000 4,255,000
Ballard Medical Products............................ 135,000 3,273,750
Marquette Medical Systems, Inc., Class A*........... 55,000 1,464,375
National Dentex Corp................................ 100,000 2,200,000
Universal Health Services, Inc., Class B............ 50,000 2,518,750
------------
13,711,875
------------
ELECTRONICS -- 8.57%
Allen Telecom, Inc.................................. 80,000 1,475,000
Altron, Inc......................................... 130,000 1,722,500
Belden, Inc......................................... 129,000 4,547,250
Burr Brown Corp.*................................... 60,000 1,927,500
DuPont Photomasks, Inc.*............................ 85,000 2,964,375
Holphane Corp.*..................................... 120,000 2,970,000
Methode Electronics, Inc., Class A.................. 130,000 2,112,500
MTS Systems Corp.................................... 80,000 3,000,000
------------
20,719,125
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
69
<PAGE>
PEGASUS SMALL-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
----------- ------ ------
<S> <C> <C>
ENERGY RAW MATERIALS -- 4.79%
Doncasters PLC ADR....................................... 153,000 $ 3,232,125
Omni Energy Services..................................... 200,000 2,350,000
Swift Energy Co.*........................................ 181,500 3,822,844
Unit Corp.*.............................................. 225,000 2,165,625
-----------
11,570,594
-----------
FOOD AND AGRICULTURE -- 1.29%
American Italian Pasta Co., Class A...................... 125,000 3,125,000
-----------
INSURANCE -- 4.36%
Capital RE Corp.......................................... 83,000 5,151,188
Conning Corp............................................. 102,500 1,716,875
Stirling Cooke Brown Holdings LTD........................ 150,000 3,675,000
-----------
10,543,063
-----------
MEDIA -- 0.92%
SPSS, Inc.*.............................................. 115,000 2,213,750
-----------
MISCELLANEOUS & CONGLOMERATES -- 20.33%
Chart Industries, Inc.................................... 175,000 3,992,187
Essex International, Inc................................. 155,600 4,629,100
General Cable Corp.*..................................... 135,000 4,885,312
IHOP Corp.*.............................................. 70,000 2,275,000
Industrial Distribution Group............................ 150,000 2,353,125
Lecg, Inc................................................ 330,000 2,887,500
Littelfuse, Inc.*........................................ 90,000 2,238,750
OmniQuip International, Inc.*............................ 204,000 4,067,250
Pameco Corp., Class A.................................... 225,000 4,275,000
Panavision, Inc.......................................... 150,000 3,871,875
Robbins & Myers, Inc..................................... 110,000 4,358,750
Rural Metro Corp.*....................................... 81,000 2,703,375
SBS Technologies, Inc.................................... 125,000 3,390,625
Stoneridge, Inc.......................................... 200,000 3,200,000
-----------
49,127,849
-----------
MISCELLANEOUS FINANCE -- 8.57%
Arm Financial Group...................................... 180,000 4,747,500
CMAC Investment Corp..................................... 65,000 3,924,375
Executive Risk, Inc...................................... 50,000 3,490,625
First Financial Corp..................................... 83,700 1,977,413
Idex Corp................................................ 105,000 3,661,875
Triad Guaranty, Inc.*.................................... 100,000 2,900,000
-----------
20,701,788
-----------
MOTOR VEHICLES -- 4.00%
Borg Warner Automotive, Inc.............................. 40,000 2,080,000
Control Devices, Inc..................................... 226,666 3,626,656
Dura Automotive Systems, Inc............................. 160,000 3,960,000
-----------
9,666,656
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
70
<PAGE>
PEGASUS SMALL-CAP OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
NON-FEROUS METALS -- 1.59%
DT Industries, Inc...................................... 113,000 $ 3,842,000
------------
OPTICAL PHOTOGRAPHIC EQUIPMENT -- 1.29%
II-VI, Inc.............................................. 130,000 3,120,000
------------
PRODUCER GOODS -- 4.27%
Kuhlman Corp............................................ 115,000 4,499,375
SPS Technologies, Inc................................... 105,000 4,580,625
Watsco, Inc............................................. 50,000 1,234,375
------------
10,314,375
------------
REAL PROPERTY -- 1.85%
Penn America Group, Inc................................. 218,000 4,469,000
------------
RETAIL -- 7.74%
Mens Warehouse, Inc..................................... 151,000 5,247,250
99 Cents Only Stores*................................... 125,000 3,687,500
Proffitts, Inc.*........................................ 177,000 5,033,437
Zale Corp.*............................................. 206,000 4,738,000
------------
18,706,187
------------
SOAPS & COSMETICS -- 2.51%
Alberto Culver Co., Class A............................. 80,000 2,160,000
Wesley Jessen Visioncare................................ 100,000 3,900,000
------------
6,060,000
------------
TRUCKING & FREIGHT -- 2.42%
C.H. Robinson Worldwide, Inc............................ 145,000 3,244,375
US Freightways Corp..................................... 80,000 2,600,000
------------
5,844,375
------------
TOTAL COMMON STOCKS....................................... 235,421,131
------------
(Cost $188,052,726)
TOTAL INVESTMENTS......................................... $241,666,698
============
(Cost $194,298,293)
</TABLE>
* Non-income producing security
See Notes to Financial Statements.
Pegasus Funds
71
<PAGE>
PEGASUS INTRINSIC VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION FACE AMOUNT VALUE
----------- ----------- ------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 2.66%
Pegasus Cash Management Fund Class I (in shares)....... 16,618,577 $16,618,577
-----------
(Cost $16,618,577)
CONVERTIBLE BONDS -- 9.94%
Nac Re Corp., 5.25%, 12/15/02......................... $16,384,560 18,555,514
Pep Boys, Zero Coupon, 9/20/11........................ 5,610,300 3,001,511
Potomac Electric Power Co., 5.00%, 9/1/02............. 15,264,000 14,977,800
Roche Holding, Inc., Zero Coupon, 5/6/12.............. 55,270,000 25,631,462
-----------
(Cost $57,481,099) 62,166,287
-----------
<CAPTION>
SHARES
------
<S> <C> <C>
NON-CONVERTIBLE PREFERRED -- 1.17%
FINANCE -- 1.17%
Salomon, Inc., 7.625% Preferred....................... 181,247 7,295,192
-----------
(Cost $5,356,956)
COMMON STOCKS -- 86.23%
AEROSPACE -- 4.55%
Lockheed Martin Corp.................................. 289,000 28,466,500
-----------
APPAREL -- 5.42%
Payless Shoesource, Inc.*............................. 298,900 20,063,662
Unifi, Inc............................................ 340,040 13,835,378
-----------
33,899,040
-----------
BANKS -- 1.91%
Pacific Century Financial Corp........................ 481,228 11,910,393
-----------
BUSINESS SERVICES -- 1.05%
Grey Advertising, Inc................................. 19,996 6,558,688
-----------
CHEMICALS -- 2.19%
NCH Corp.............................................. 208,711 13,670,571
-----------
CONSUMER DURABLES -- 0.83%
National Presto Industries, Inc....................... 131,600 5,206,425
-----------
DOMESTIC OIL -- 0.91%
Atlantic Richfield Co................................. 71,026 5,690,958
-----------
DRUGS AND MEDICINE -- 4.50%
Arch Coal, Inc........................................ 592,730 16,225,983
Block Drug, Inc., Class A............................. 134,586 5,820,844
Mid Ocean Ltd......................................... 111,800 6,065,150
-----------
28,111,977
-----------
ENERGY AND UTILITIES -- 6.79%
Sierra Pacific Resources.............................. 342,090 12,828,375
SJW Corp.............................................. 10,419 630,350
Southwest Gas Corporation............................. 509,200 9,515,675
St. Joeseph Light & Power Co.......................... 323,150 5,756,109
Washington Water Power Co............................. 565,145 13,740,088
-----------
42,470,597
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
72
<PAGE>
PEGASUS INTRINSIC VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
FOOD AND AGRICULTURE -- 4.41%
Farmer Brothers Co...................................... 69,521 $ 13,000,427
Tate & Lyle PLC Sponsored............................... 440,800 14,563,812
------------
27,564,239
------------
INSURANCE -- 14.62%
Allmerica Financial Corp................................ 167,200 8,349,550
American National Insurance Co.......................... 211,790 19,696,470
Citizens Corp........................................... 505,800 14,541,750
Financial Security Assurance Holdings................... 226,479 10,927,612
Ohio Casualty Corp...................................... 159,900 7,135,538
Old Republic International Corp......................... 555,594 20,661,151
Safeco Corp............................................. 207,461 10,113,724
------------
91,425,795
------------
INTERNATIONAL OIL -- 0.64%
Amoco Corp.............................................. 47,304 4,026,753
------------
MISCELLANEOUS AND CONGLOMERATES -- 2.55%
Diageo PLC.............................................. 421,548 15,966,131
------------
MISCELLANEOUS FINANCE -- 14.89%
Associated Estates Realty............................... 172,700 4,090,831
Federal National Mortgage Association................... 437,300 24,953,431
Fund American Enterprises Holdings, Inc................. 257,290 31,132,090
Leucadia National Corp.................................. 767,570 26,481,165
PXRE Corp............................................... 194,700 6,461,606
------------
93,119,123
------------
MOTOR VEHICLES -- 0.80%
Ford Motor Co........................................... 102,156 4,973,720
------------
NON-DURABLES AND ENTERTAINMENT -- 4.85%
Hasbro, Inc............................................. 301,684 9,503,046
Lubys Cafeterias, Inc................................... 470,066 8,255,534
Sbarro, Inc............................................. 478,219 12,583,137
------------
30,341,717
------------
PRODUCER GOODS -- 0.31%
Tennant Co.............................................. 52,586 1,912,816
------------
RAILROADS AND SHIPPING -- 4.13%
Alexander & Baldwin, Inc. .............................. 450,553 12,305,728
Illinois Central Corp. Series A......................... 397,000 13,522,813
------------
25,828,541
------------
RETAIL -- 1.58%
Stanhome, Inc. ......................................... 385,700 9,907,669
------------
TIRES AND RUBBER GOODS -- 2.79%
Bandag, Inc. Class A.................................... 363,790 17,416,446
------------
TOBACCO -- 6.51%
Loews Corp.............................................. 301,300 31,975,463
UST, Inc. .............................................. 236,400 8,732,025
------------
40,707,488
------------
TOTAL COMMON STOCKS....................................... 539,175,587
------------
(Cost $425,725,986)
TOTAL INVESTMENTS......................................... $625,255,643
============
(Cost $505,182,618)
</TABLE>
* Non-income producing security.
See Notes to Financial Statements.
Pegasus Funds
73
<PAGE>
PEGASUS GROWTH AND VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 2.76%
Pegasus Cash Management Fund Class I (in shares)....... 27,907,105 $27,907,105
U.S. Treasury Bills 03/26/98(1)........................ $1,100,000 1,086,910
U.S. Treasury Bills 06/18/98(1)........................ 300,000 292,764
-----------
TOTAL TEMPORARY CASH INVESTMENTS........................ 29,286,779
-----------
(Cost $29,286,779)
<CAPTION>
SHARES
----------
<S> <C> <C>
COMMON STOCKS -- 97.24%
AEROSPACE -- 1.55%
Boeing Co............................................. 336,000 16,443,000
-----------
APPAREL -- 1.48%
Russell Corp.......................................... 593,000 15,751,563
-----------
BANKS -- 5.21%
BankAmerica Corp...................................... 288,000 21,024,000
Norwest Corp.......................................... 888,000 34,299,000
-----------
55,323,000
-----------
BUSINESS MACHINES -- 2.59%
Electronic Data Systems Corp.......................... 625,000 27,460,938
-----------
BUSINESS SERVICES -- 6.62%
Auto Data Processing, Inc............................. 520,000 31,915,000
Deluxe Corp........................................... 676,000 23,322,000
First Data Corp....................................... 517,000 15,122,250
-----------
70,359,250
-----------
CHEMICALS -- 2.65%
Sigma-Aldrich Corp.................................... 708,000 28,143,000
-----------
CONSTRUCTION -- 4.17%
Masco Corp............................................ 488,000 24,827,000
York International Corp............................... 493,000 19,504,313
-----------
44,331,313
-----------
CONSUMER DURABLES -- 2.51%
Newell Co............................................. 627,000 26,647,500
-----------
CONTAINERS -- 1.83%
Crown Cork & Seal Co., Inc............................ 388,000 19,448,500
-----------
DRUGS AND MEDICINE -- 8.88%
Abbott Laboratories Corp.............................. 367,000 24,061,438
Bristol-Myers Squibb Co............................... 373,000 35,295,125
Schering-Plough Corp.................................. 563,000 34,976,375
-----------
94,332,938
-----------
ELECTRONICS -- 8.18%
AMP, Inc.............................................. 581,000 24,402,000
Andrew Corp........................................... 397,000 9,528,000
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
74
<PAGE>
PEGASUS GROWTH AND VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
----------- ------ ------
<S> <C> <C>
ELECTRONICS -- CONTINUED
Hewlett Packard Co..................................... 333,000 $20,812,500
Lucent Technologies, Inc............................... 184,000 14,697,000
Motorola, Inc.......................................... 305,000 17,404,063
-----------
86,843,563
-----------
ENERGY AND UTILITIES -- 10.45%
Enron Corp............................................. 442,000 18,370,625
FPL Group Inc.......................................... 485,000 28,705,938
MCN Energy Group, Inc.................................. 834,000 33,672,750
Pinnacle West Capital Corp............................. 713,000 30,213,375
-----------
110,962,688
-----------
ENERGY RAW MATERIALS -- 3.03%
Schlumberger Ltd....................................... 400,000 32,200,000
-----------
FOOD AND AGRICULTURE -- 7.70%
ConAgra, Inc........................................... 810,000 26,578,125
CPC International, Inc................................. 271,000 29,200,250
PepsiCo, Inc........................................... 713,000 25,979,938
-----------
81,758,313
-----------
INSURANCE -- 3.86%
American International Group, Inc...................... 163,000 17,726,250
Chubb Corp............................................. 308,000 23,292,500
-----------
41,018,750
-----------
INTERNATIONAL OIL -- 2.05%
British Petroleum PLC ADR.............................. 273,420 21,788,156
-----------
LIQUOR -- 2.40%
Anheuser-Busch Companies, Inc.......................... 580,000 25,520,000
-----------
MEDIA -- 5.17%
Gannett Co., Inc....................................... 384,000 23,736,000
Washington Post Co. Class B............................ 64,000 31,136,000
-----------
54,872,000
-----------
MISCELLANEOUS & CONGLOMERATES -- 2.58%
Cognizant Corp......................................... 614,000 27,361,375
-----------
MISCELLANEOUS FINANCE -- 1.85%
PMI Group, Inc......................................... 273,000 19,741,313
-----------
NON-DURABLES AND ENTERTAINMENT -- 2.31%
Kimberly-Clark Corp.................................... 497,000 24,508,313
-----------
PRODUCER GOODS -- 2.65%
Dover Corp............................................. 782,000 28,249,750
-----------
RETAIL -- 5.11%
Officemax, Inc......................................... 1,532,000 21,831,000
Pep Boys Manny Moe & Jack.............................. 753,000 17,977,875
Toys R Us*............................................. 460,000 14,461,250
-----------
54,270,125
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
75
<PAGE>
PEGASUS GROWTH AND VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TELEPHONE -- 2.41%
Century Telephone Enterprises, Inc.................... 514,000 $ 25,603,621
--------------
TOTAL COMMON STOCKS..................................... 1,032,938,969
--------------
(Cost $716,844,154)
TOTAL INVESTMENTS....................................... $1,062,225,748
==============
(Cost $746,130,933)
</TABLE>
* Non-income producing security.
(1) Securities represent the margin deposit for the futures contracts.
FUTURES CONTRACTS
<TABLE>
<CAPTION>
UNDERLYING
EXPIRATION FACE AMOUNT UNREALIZED
PURCHASED DATE AT VALUE GAIN/(LOSS)
- -------------------------------------------------------
<S> <C> <C> <C>
5 S&P 500 Futures 3/98 $ 1,223,875 $ (7,588)
115 S&P 500 Futures 6/98 28,436,625 345,200
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
76
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.37%
Pegasus Cash Management Fund Class I................... 3,109,780 $ 3,109,780
------------
(COST $3,109,780)
COMMON STOCKS -- 99.63%
AEROSPACE -- 1.90%
Boeing Co............................................. 111,757 5,469,108
General Dynamics Corp................................. 5,241 453,019
Goodrich B. F. Co..................................... 7,600 314,925
Lockheed Martin Corp.................................. 21,247 2,092,829
Northrop Grumman Corp................................. 7,368 847,320
Raytheon Co. Class A.................................. 5,113 252,151
Raytheon Co. Class B.................................. 25,596 1,292,598
Rockwell International Corp........................... 24,874 1,299,667
Textron, Inc.......................................... 18,048 1,128,000
TRW, Inc.............................................. 15,942 850,904
United Technologies Corp.............................. 25,164 1,832,254
------------
15,832,775
------------
AIR TRANSPORT -- 0.52%
AMR Corp.*............................................ 9,148 1,175,518
Delta Air Lines, Inc.................................. 8,935 1,063,265
Federal Express Corp.*................................ 12,909 788,256
Southwest Airlines Co................................. 31,429 773,951
USAir Group, Inc.*.................................... 9,100 568,750
------------
4,369,740
------------
APPAREL -- 0.33%
Fruit of the Loom, Inc., Class A*..................... 8,497 217,736
Liz Claiborne, Inc.................................... 5,553 232,185
Nike, Inc., Class B................................... 32,790 1,287,007
Reebok International Ltd.............................. 6,193 178,436
Russell Corp.......................................... 10,900 289,531
V.F. Corp............................................. 12,454 572,106
------------
2,777,001
------------
BANKS -- 9.11%
Banc One Corp......................................... 63,176 3,431,247
Bank of Boston Corp................................... 16,796 1,577,774
Bank of New York Co., Inc............................. 41,443 2,395,923
BankAmerica Corp...................................... 75,280 5,495,440
Bankers Trust New York Corp........................... 10,960 1,232,315
Barnett Banks, Inc.................................... 22,251 1,599,291
BB & T Corp........................................... 15,100 967,344
Chase Manhattan Corp.................................. 45,603 4,993,529
Citicorp.............................................. 49,956 6,316,312
Comerica, Inc......................................... 13,393 1,208,718
Corestates Financial Corp............................. 23,736 1,900,364
First Chicago NBD Corp................................ 32,601 2,722,184
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
77
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
First Union Corp........................................ 69,252 $ 3,549,165
Fleet Financial Group, Inc.............................. 28,149 2,109,416
Fifth Third Bancorp..................................... 16,111 1,317,074
Huntington Bankshares, Inc.............................. 17,600 633,600
J.P. Morgan and Co., Inc................................ 20,177 2,277,479
Keycorp................................................. 24,841 1,759,053
MBNA Corp............................................... 54,891 1,499,210
Mellon Bank Corp........................................ 29,600 1,794,500
Morgan Stanley Dean Witter.............................. 65,100 3,849,038
Norwest Corp............................................ 81,732 3,156,898
Nationsbank Corp........................................ 78,598 4,779,741
National City Corp...................................... 22,305 1,466,554
PNC Bank Corp........................................... 31,420 1,792,904
Republic NY Corp........................................ 6,691 764,028
State Street Corp....................................... 17,800 1,035,737
Suntrust Banks, Inc..................................... 24,492 1,748,116
Synovus Financial Corp.................................. 19,300 632,075
U.S. Bancorp............................................ 27,062 3,029,252
Wachovia Corp........................................... 22,453 1,821,500
Wells Fargo & Co........................................ 9,350 3,173,740
------------
76,029,521
------------
BUSINESS MACHINES -- 6.29%
Bay Networks, Inc....................................... 18,433 471,194
Ceridian Corp.*......................................... 7,345 336,493
Cisco Systems, Inc...................................... 112,911 6,294,788
Compaq Computer Corp.*.................................. 86,824 4,900,130
Dell Computer Corp.*.................................... 36,722 3,084,648
Digital Equipment Corp.*................................ 16,379 606,023
Honeywell, Inc.......................................... 14,096 965,576
International Business Machines Corp.................... 108,372 11,331,647
Microsoft Corp.*........................................ 132,243 17,092,408
Nextlevel Systems, Inc.................................. 16,300 291,362
Novell, Inc.*........................................... 46,900 351,750
Pitney Bowes, Inc....................................... 18,448 1,659,167
Seagate Technology*..................................... 27,865 536,401
Silicon Graphics*....................................... 22,900 284,819
Sun Microsystems, Inc.*................................. 39,267 1,565,771
Xerox Corp.............................................. 36,335 2,681,977
------------
52,454,154
------------
BUSINESS SERVICES -- 2.17%
Automatic Data Processing, Inc.......................... 31,779 1,950,436
Block (H.&R.) Inc....................................... 8,057 361,054
Browning-Ferris Industries, Inc......................... 21,635 800,495
Cendent Corp............................................ 86,475 2,972,603
Computer Associates International, Inc.................. 61,353 3,244,040
Computer Sciences Corp.................................. 7,676 640,946
Deluxe Corp............................................. 8,215 283,418
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
78
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Dun & Bradstreet Corp.................................... 18,167 $ 562,042
Ecolab, Inc.............................................. 11,194 620,567
Equifax, Inc............................................. 16,600 588,262
First Data Corp.......................................... 48,529 1,419,473
Interpublic Group of Companies, Inc...................... 12,132 604,325
KLA Tencor Corp.......................................... 9,400 363,075
Shared Medical Sysjtem, Inc.............................. 5,400 356,400
U.S. West Media Group.................................... 69,144 1,996,533
Waste Management, Inc.................................... 50,275 1,382,563
------------
18,146,232
------------
CHEMICALS -- 2.38%
Air Products & Chemicals, Inc............................ 11,190 920,377
Dow Chemical Co.......................................... 23,821 2,417,832
DuPont (E I) de Nemours & Co., Inc....................... 126,082 7,572,800
Grace (W.R.) & Co........................................ 9,445 759,732
Hercules, Inc............................................ 8,610 431,038
Monsanto Co.............................................. 67,511 2,835,462
Morton International, Inc................................ 13,635 468,703
Nalco Chemical Co........................................ 8,600 340,238
PPG Industries, Inc...................................... 20,140 1,150,498
Praxair, Inc............................................. 17,003 765,135
Rohm & Haas Co........................................... 6,141 588,001
Safety Kleen Corp........................................ 16,500 452,719
Sigma-Aldrich Corp....................................... 11,005 437,448
Union Carbide Corp....................................... 16,045 688,932
------------
19,828,915
------------
CONSTRUCTION -- 0.53%
Armstrong World Industries, Inc.......................... 4,556 340,561
Centex Corp.............................................. 6,612 416,143
Fluor Corp............................................... 8,470 316,566
Kaufman & Broad Home Corp................................ 20,233 453,978
Masco Corp............................................... 18,597 946,122
Owens-Corning Fiberglass Corp............................ 8,129 277,402
Sherwin Williams Co...................................... 15,416 427,794
Stanley Works............................................ 7,117 335,834
Sunamerica, Inc.......................................... 21,600 923,400
------------
4,437,800
------------
CONSUMER DURABLES -- 0.29%
Black & Decker Corp...................................... 10,929 426,914
Maytag Corp.............................................. 11,800 440,288
Newell Co................................................ 16,158 686,715
Rubbermaid, Inc.......................................... 16,441 411,025
Whirlpool Corp........................................... 8,355 459,525
------------
2,424,467
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
79
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
CONTAINERS -- 0.19%
Ball Corp............................................... 3,457 $ 122,075
Crown Cork & Seal Co., Inc.............................. 13,130 658,141
Owens Illinois, Inc..................................... 15,300 580,444
Stone Container Corp.................................... 17,556 183,241
------------
1,543,901
------------
DOMESTIC OIL -- 1.12%
Amerada Hess Corp....................................... 8,560 469,730
Ashland Oil, Inc........................................ 8,240 442,385
Atlantic Richfield Co................................... 34,960 2,801,170
Kerr-McGee Corp......................................... 4,408 279,082
Oryx Energy Co.*........................................ 11,500 293,250
Pennzoil Co............................................. 7,062 471,830
Phillips Petroleum Co................................... 29,271 1,423,302
Sun Co., Inc............................................ 10,200 429,038
Union Pacific Resources Group........................... 21,506 521,521
Unocal Corp............................................. 29,993 1,164,103
USX-Marathon Group...................................... 31,654 1,068,322
------------
9,363,733
------------
DRUGS AND MEDICINE -- 11.04%
Abbott Laboratories..................................... 85,599 5,612,084
American Home Products Corp............................. 72,910 5,577,615
Amgen, Inc.*............................................ 28,792 1,558,367
Baxter International, Inc............................... 31,385 1,582,981
Becton Dickinson & Co................................... 14,362 718,100
Biomet, Inc.*........................................... 13,500 345,938
Bristol-Myers Squibb Co................................. 110,416 10,448,114
Columbia/HCA Healthcare Corp............................ 77,833 2,305,803
Guidant Corp............................................ 16,418 1,022,021
HBO & Co................................................ 21,000 1,008,000
Healthsouth Corp........................................ 42,138 1,169,329
Humana, Inc.*........................................... 17,137 355,593
Johnson & Johnson....................................... 146,818 9,671,636
Lilly (Eli) & Co........................................ 120,976 8,422,954
Mallinckrodt Group, Inc................................. 8,900 338,200
Manor Care, Inc......................................... 9,300 325,500
Medtronic, Inc.......................................... 53,904 2,819,853
Merck & Co., Inc........................................ 134,374 14,277,238
Pall Corp............................................... 15,700 324,794
Pfizer, Inc............................................. 144,476 10,772,491
Pharmacia & Upjohn Co................................... 59,708 2,186,805
St. Jude Medical, Inc.*................................. 11,300 344,650
Schering-Plough Corp.................................... 82,812 5,144,696
Tenet Healthcare Corp.*................................. 33,462 1,108,428
United Healthcare Corp.................................. 19,225 955,242
Warner Lambert Co....................................... 29,763 3,690,612
------------
92,087,044
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
80
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
ELECTRONICS -- 5.33%
3Com Corp.*............................................. 36,689 $ 1,281,822
Advanced Micro Devices, Inc.*........................... 16,022 287,395
AMP, Inc................................................ 23,240 976,080
Andrew Corp.*........................................... 12,000 288,000
Boston Scientific Corp.*................................ 21,666 993,928
EMC Corp.*.............................................. 55,874 1,533,043
General Signal Corp..................................... 6,500 274,219
Harris Corp............................................. 10,812 496,000
Hewlett-Packard Co...................................... 116,955 7,309,688
Intel Corp.............................................. 180,190 12,658,348
Johnson Controls, Inc................................... 9,804 468,141
LSI Logic Corp.*........................................ 15,985 315,704
Lucent Technologies, Inc................................ 71,414 5,704,193
Micron Technology, Inc.................................. 23,749 617,474
Motorola, Inc........................................... 66,101 3,771,888
National Semiconductor Corp.*........................... 15,132 392,486
Northern Telecom Ltd.................................... 28,373 2,525,197
Parametric Technology Corp.............................. 14,000 663,250
Perkin Elmer Corp....................................... 4,800 341,100
Raychem Corp............................................ 11,206 482,558
Thermo Electron Corp.................................... 16,777 746,577
Texas Instruments, Inc.................................. 43,386 1,952,370
Thomas & Betts Corp..................................... 7,400 349,650
------------
44,429,111
------------
ENERGY AND UTILITIES -- 3.37%
American Electric Power Co., Inc........................ 20,280 1,046,955
Baltimore Gas & Electric Co............................. 17,663 601,646
Carolina Power & Light Co............................... 16,718 709,470
Central & SouthWest Corp................................ 20,293 549,179
CINergy Corp............................................ 15,367 588,748
Coastal Corp............................................ 10,572 654,803
Columbia Gas System, Inc................................ 7,993 627,950
Consolidated Edison Co. of New York, Inc................ 26,877 1,101,957
Consolidated Natural Gas Co............................. 9,603 580,982
Dominion Resources, Inc................................. 20,419 869,084
DTE Energy, Inc......................................... 15,571 540,119
Duke Power Co........................................... 39,188 2,170,036
Edison International.................................... 47,428 1,289,449
Enron Corp.............................................. 33,683 1,399,950
Entergy Corp............................................ 29,924 895,850
Firstenergy Corp........................................ 25,391 736,339
FPL Group, Inc.......................................... 21,280 1,259,510
General Public Utilities Corp........................... 13,640 574,585
Houston Industries, Inc................................. 32,902 878,072
Niagara Mohawk Power Corp............................... 33,700 353,850
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
81
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Northern States Power Co................................ 7,451 $ 434,021
PP&L Resources, Inc..................................... 21,745 520,521
Pacific Enterprises..................................... 9,300 349,913
Pacific Gas & Electric Co............................... 52,151 1,587,346
PacifiCorp.............................................. 31,880 870,723
PECO Energy Co.......................................... 23,809 577,368
Public Service Enterprise Group, Inc.................... 23,597 747,730
Sonat, Inc.............................................. 10,691 489,113
Southern Co............................................. 71,819 1,858,317
Texas Utilities Co...................................... 27,654 1,149,369
Unicom Corp............................................. 23,024 707,988
Union Electric Co....................................... 12,821 554,508
Williams Companies, Inc................................. 30,444 863,849
------------
28,139,300
------------
ENERGY RAW MATERIALS -- 1.43%
Anadarko Petroleum Corp................................. 6,600 400,538
Apache Corp............................................. 10,000 350,625
Baker Hughes, Inc....................................... 15,450 674,006
Barricks Gold Corp...................................... 38,235 712,127
Burlington Resources, Inc............................... 18,636 835,126
Dresser Industries, Inc................................. 19,462 816,188
Halliburton Co.......................................... 28,108 1,459,859
Helmerich & Payne, Inc.................................. 3,937 267,224
Occidental Petroleum Corp............................... 37,520 1,099,805
Rowan Companies, Inc.*.................................. 15,553 474,367
Schlumberger Ltd........................................ 54,974 4,425,407
Western Atlas, Inc.*.................................... 5,727 423,798
------------
11,939,070
------------
FOOD AND AGRICULTURE -- 5.83%
Archer Daniels Midland Co............................... 65,037 1,410,490
Cardinal Health, Inc.................................... 12,100 909,012
Campbell Soup Co........................................ 51,986 3,021,686
Coca-Cola Co............................................ 273,719 18,236,528
ConAgra, Inc............................................ 52,158 1,711,434
CPC International, Inc.................................. 15,615 1,682,516
Darden Restaurants, Inc................................. 37,561 469,513
General Mills, Inc...................................... 17,041 1,220,562
Heinz (H.J.) Co......................................... 38,896 1,976,403
Hershey Foods Corp...................................... 16,857 1,044,080
Kellogg Co.............................................. 47,144 2,339,521
PepsiCo, Inc............................................ 172,243 6,276,104
Pioneer Hi-Bred International, Inc...................... 7,800 836,550
Quaker Oats Co.......................................... 13,800 727,950
Ralston-Ralston Purina Group............................ 11,577 1,075,937
Sara Lee Corp........................................... 55,509 3,125,851
Sysco Corp.............................................. 24,140 1,099,879
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
82
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Tricon Global Restaurants............................... 17,224 $ 500,573
Wrigley (Wm.) Jr Co..................................... 11,762 935,814
------------
48,600,403
------------
GOLD -- 0.07%
Battle Mountain Gold Co................................. 23,473 137,904
Homestake Mining Co..................................... 14,681 130,294
Placer Dome, Inc........................................ 27,977 354,958
------------
623,156
------------
INSURANCE -- 3.58%
Allstate Corp........................................... 48,010 4,362,909
American General Corp................................... 27,019 1,460,715
American International Group, Inc....................... 77,354 8,412,248
AON Corp................................................ 18,253 1,070,082
Chubb Corp.............................................. 17,534 1,326,009
CIGNA Corp.............................................. 7,816 1,352,657
Cincinnati Financial Corp............................... 6,000 844,500
General Re Corp......................................... 8,295 1,758,540
ITT Hartford Group, Inc................................. 12,002 1,122,937
Jefferson-Pilot Corp.................................... 6,463 503,306
Lincoln National Corp................................... 11,498 898,281
Marsh & McLennan Companies, Inc......................... 17,928 1,336,757
Progressive Corp. (Ohio)................................ 7,900 947,012
SAFECO Corp............................................. 12,451 606,986
St. Paul Companies...................................... 11,161 915,900
Torchmark Corp.......................................... 18,858 793,215
Transamerica Corp....................................... 6,815 725,797
UNUM Corp............................................... 19,298 1,049,328
USF&G Corp.............................................. 16,500 364,031
------------
29,851,210
------------
INTERNATIONAL OIL -- 5.88%
Amoco Corp.............................................. 53,922 4,590,110
Chevron Corp............................................ 71,912 5,537,224
Exxon Corp.............................................. 273,040 16,706,635
Mobil Corp.............................................. 86,724 6,260,389
Royal Dutch Petroleum Co., N.Y. Registry................ 236,640 12,822,930
Texaco, Inc............................................. 57,578 3,130,804
------------
49,048,092
------------
LIQUOR -- 0.51%
Anheuser-Busch Companies, Inc........................... 54,233 2,386,252
Brown Forman Corp. Class B.............................. 10,768 594,932
Seagram Co. Ltd......................................... 39,428 1,274,017
------------
4,255,201
------------
MEDIA -- 2.01%
Adobe System, Inc....................................... 8,000 330,000
Cabletron System, Inc.*................................. 16,806 252,090
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
83
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Clear Channel Communication............................. 10,000 $ 794,375
Comcast Corp. Class A Special........................... 38,985 1,230,464
Donnelley (R.R.) & Sons Co.............................. 14,361 534,947
Dow Jones & Co., Inc.................................... 10,552 566,511
Gannett Co., Inc........................................ 29,582 1,828,537
King World Productions, Inc............................. 6,100 352,275
Knight-Ridder, Inc...................................... 12,559 653,068
McGraw Hill Companies, Inc.............................. 9,911 733,414
New York Times Co. Class A.............................. 13,915 920,129
Tele-Communications, Inc. Class A....................... 53,863 1,504,798
Time Warner, Inc........................................ 63,990 3,967,380
Times Mirror Co. Class A................................ 10,951 673,487
Tribune Co.............................................. 12,467 776,071
Viacom, Inc. Class B Non-Voting*........................ 39,626 1,642,002
------------
16,759,548
------------
MISCELLANEOUS AND CONGLOMERATES -- 1.32%
Case Corp............................................... 6,265 378,641
Cognizant Corp.......................................... 18,167 809,566
Corning, Inc............................................ 28,111 1,043,621
Eastman Chemical Co..................................... 8,252 491,510
Georgia Pacific Timber.................................. 10,387 235,655
ITT Corp.*.............................................. 11,858 982,732
ITT Industries, Inc..................................... 17,186 539,211
Minnesota Mining & MFG Co............................... 46,893 3,848,157
Tyco International LTD.................................. 59,632 2,687,167
------------
11,016,260
------------
MISCELLANEOUS FINANCE -- 4.10%
Aetna, Inc.............................................. 16,312 1,151,016
Ahmanson (H.F.) & Co.................................... 10,053 672,923
American Express Co..................................... 52,022 4,642,964
Beneficial Corp......................................... 5,757 478,551
Countrywide Credit Industry............................. 11,500 493,063
Federal Home Loan Mortgage Corp......................... 77,662 3,256,950
Federal National MTG Assn............................... 117,078 6,680,763
Golden West Financial Corp.............................. 6,635 648,986
Green Tree Financial Corp............................... 14,689 384,668
Household International, Inc............................ 11,776 1,502,176
MBIA, Inc............................................... 10,082 673,604
Merrill Lynch & Co., Inc................................ 35,652 2,600,368
MGIC Investment Corp.................................... 12,386 823,669
Providian Financial Corp................................ 11,231 507,500
Schwab Charles Corp..................................... 28,950 1,214,091
Travelers, Inc.......................................... 125,194 6,744,826
Washington Mutual....................................... 27,532 1,756,885
------------
34,233,003
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
84
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
MOTOR VEHICLES -- 2.06%
Autozone, Inc........................................... 16,849 $ 488,621
Chrysler Corp........................................... 80,806 2,843,361
Cummins Engine Co., Inc................................. 4,900 289,406
Dana Corp............................................... 11,898 565,155
Eaton Corp.............................................. 8,305 741,221
Echlin, Inc............................................. 10,200 369,113
Ford Motor Co........................................... 132,359 6,444,229
General Motors Corp..................................... 80,184 4,861,155
Genuine Parts Co........................................ 18,165 616,475
------------
17,218,736
------------
NON-DURABLES AND ENTERTAINMENT -- 1.56%
American Greetings Corp. Class A........................ 8,425 329,628
Harcourt General, Inc................................... 7,111 389,327
Hasbro, Inc............................................. 11,511 362,597
Kimberly-Clark Corp..................................... 63,098 3,111,520
Mattel, Inc............................................. 28,507 1,061,886
McDonalds Corp.......................................... 77,605 3,705,639
Oracle Systems Corp. *.................................. 113,985 2,543,290
Service Corp. International............................. 31,789 1,174,206
Wendy's International, Inc.............................. 14,500 348,906
------------
13,026,999
------------
NON-FERROUS METALS -- 0.69%
Alcan Aluminum Ltd...................................... 22,182 612,778
Allegheny Teledyne, Inc................................. 18,840 487,485
Aluminum Co. of America................................. 18,969 1,334,943
Asarco, Inc............................................. 10,081 226,192
Cyprus Amax Mineral Co.................................. 13,078 201,074
Engelhard Corp.......................................... 17,991 312,594
Freeport McMoran Copper Class B......................... 23,905 376,504
Inco Limited............................................ 18,558 315,486
Laidlaw, Inc............................................ 34,015 463,454
Newmont Mining Corp..................................... 18,815 552,690
Phelps Dodge Corp....................................... 6,738 419,441
Reynolds Metals Co...................................... 7,160 429,600
------------
5,732,241
------------
OPTICAL PHOTOGRAPHIC EQUIPMENT -- 0.28%
Eastman Kodak Co........................................ 38,623 2,348,761
------------
PAPER AND FOREST PRODUCTS -- 0.82%
Bemis, Inc.............................................. 4,177 184,049
Champion International Corp............................. 10,768 487,925
Georgia-Pacific Corp.................................... 10,387 631,010
International Paper Co.................................. 32,379 1,396,344
Fort James Corp......................................... 21,004 803,403
Louisiana Pacific Corp.................................. 14,600 277,400
Mead Corp............................................... 15,680 439,040
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
85
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Temple-Inland, Inc...................................... 7,723 $ 404,009
Union Camp Corp......................................... 6,604 354,552
Westvaco Corp........................................... 11,910 374,421
Weyerhaeuser Co......................................... 21,792 1,069,170
Willamette Industries, Inc.............................. 13,970 449,659
------------
6,870,982
------------
PRODUCER GOODS -- 5.76%
Alco Standard Corp...................................... 16,392 461,025
Allied Signal, Inc...................................... 64,552 2,513,494
Applied Materials Co.*.................................. 38,684 1,165,355
Avery Dennison Corp..................................... 11,909 532,928
CBS Corp................................................ 76,724 2,258,563
Caterpillar, Inc........................................ 42,740 2,075,561
Conseco, Inc............................................ 21,000 954,188
Cooper Industries, Inc.................................. 12,499 612,451
Deere & Co.............................................. 29,106 1,697,243
Dover Corp.............................................. 24,138 871,985
Emerson Electric Co..................................... 50,814 2,867,815
FMC Corp.*.............................................. 3,747 252,219
General Electric Co..................................... 361,328 26,512,442
Grainger (W.W.), Inc.................................... 4,833 469,707
Harnischfeger Industries, Inc........................... 7,400 261,312
Illinois Tool Works, Inc................................ 25,428 1,528,859
Ingersoll-Rand Co....................................... 15,619 632,570
Millipore Corp.......................................... 6,800 230,775
Parker-Hannifin Corp.................................... 12,976 595,274
Snap-On, Inc............................................ 7,800 340,275
Tenneco, Inc............................................ 18,607 734,977
Timken Co............................................... 15,122 519,819
------------
48,088,837
------------
RAILROADS AND SHIPPING -- 0.70%
Burlington Northern Santa Fe............................ 17,659 1,641,183
CSX Corp................................................ 23,242 1,255,068
Norfolk Southern Corp................................... 40,125 1,236,352
Union Pacific Corp...................................... 27,045 1,688,622
------------
5,821,225
------------
RETAIL -- 4.70%
Albertsons, Inc......................................... 26,979 1,278,130
American Stores Co...................................... 32,494 668,158
Circuit City Stores, Inc................................ 14,591 518,892
Dayton Hudson Corp...................................... 24,180 1,632,150
Dillard Department Stores Class A....................... 10,894 384,014
Federated Department Stores, Inc.*...................... 20,305 874,384
Gap, Inc................................................ 43,287 1,533,983
Home Depot, Inc......................................... 79,992 4,709,529
Kmart Corp.*............................................ 59,393 686,732
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
86
<PAGE>
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Kroger Co.*............................................. 27,858 $ 1,029,004
Limited, Inc............................................ 30,520 778,260
Lowes Companies, Inc.................................... 20,725 988,323
May Department Stores Co................................ 27,699 1,459,391
Melville Corp........................................... 18,345 1,175,226
Mercantile Stores, Inc.................................. 5,100 310,463
Nordstrom, Inc.......................................... 7,484 451,847
Penney (J.C.) & Co., Inc................................ 28,640 1,727,350
Price/Costco, Inc.*..................................... 25,426 1,134,635
Rite-Aid Corp........................................... 13,649 801,026
Sears, Roebuck & Co..................................... 44,812 2,027,743
Tandy Corp.............................................. 13,160 507,483
TJX Companies, Inc...................................... 17,138 589,118
Toys R Us*.............................................. 28,561 897,886
Wal Mart Stores, Inc.................................... 252,421 9,954,853
Walgreen Co............................................. 62,046 1,946,693
Winn-Dixie Stores, Inc.................................. 18,270 798,171
Woolworth Corp.*........................................ 15,100 307,663
------------
39,171,107
------------
SOAPS AND COSMETICS -- 3.29%
Alberto-Culver Co. Class B.............................. 10,500 336,656
Avon Products, Inc...................................... 17,194 1,055,282
Clorox Co............................................... 9,572 756,786
Colgate-Palmolive Co.................................... 32,872 2,416,092
Gillette Co............................................. 62,223 6,249,523
International Flavors & Fragrances, Inc................. 10,688 550,432
Procter & Gamble Co..................................... 147,296 11,756,062
Unilever N.V............................................ 69,036 4,310,435
------------
27,431,268
------------
STEEL -- 0.14%
Armco, Inc.*............................................ 85,322 421,277
Nucor Corp.............................................. 8,179 395,148
USX-- U.S. Steel Group.................................. 5,637 176,156
Worthington Industries, Inc............................. 9,134 150,711
------------
1,143,292
------------
TELEPHONE -- 7.06%
AT&T Corp............................................... 179,264 10,979,920
AirTouch Communications, Inc.*.......................... 56,025 2,328,539
ALLTEL Corp............................................. 25,217 1,035,473
Ameritech Corp.......................................... 61,570 4,956,385
Bell Atlantic Corp...................................... 86,324 7,855,484
Bellsouth Corp.......................................... 108,895 6,132,150
Frontier Corp........................................... 18,361 441,811
GTE Corp................................................ 104,331 5,451,295
MCI Communications Corp................................. 74,188 3,176,174
SBC Communications, Inc................................. 99,944 7,320,898
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
87
<PAGE>
PEGASUS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Sprint Corp............................................. 49,944 $ 2,927,967
Tellabs, Inc.*.......................................... 20,086 1,062,047
US WEST Communications Group*........................... 51,184 2,309,678
Worldcom, Inc.*......................................... 95,778 2,897,285
------------
58,875,106
------------
TIRES AND RUBBER GOODS -- 0.16%
Cooper Tire & Rubber Co................................. 12,703 309,636
Goodyear Tire & Rubber Co............................... 16,591 1,055,602
------------
1,365,238
------------
TOBACCO -- 1.79%
Fortune Brands, Inc..................................... 18,700 693,069
Loews Corp.............................................. 12,695 1,347,257
Philip Morris Companies, Inc............................ 267,385 12,115,883
UST, Inc................................................ 21,612 798,292
------------
14,954,501
------------
TRAVEL AND RECREATION -- 1.21%
Disney (Walt) Co........................................ 76,312 7,559,658
Harrahs Entertainment................................... 16,700 315,213
Hilton Hotels Corp...................................... 28,824 857,514
Marriott International, Inc............................. 13,707 949,209
Mirage Resorts, Inc..................................... 19,600 445,900
------------
10,127,494
------------
TRUCKING AND FREIGHT -- 0.11%
Caliber System, Inc..................................... 5,653 275,230
PACCAR, Inc............................................. 6,182 324,555
Ryder Systems, Inc...................................... 8,800 288,200
------------
887,985
------------
TOTAL COMMON STOCKS....................................... 831,253,409
------------
(Cost $508,470,401)
TOTAL INVESTMENTS......................................... $834,363,189
============
(Cost $511,580,181)
</TABLE>
*Non-income producing security
See Notes to Financial Statements.
Pegasus Funds
88
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT MARKET VALUE
------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 5.45%
Pegasus Cash Management Fund Class I (in shares)...... 20,926,655 $20,926,655
Salomon Brothers, Revolving Repurchase Agreement,
6.625%, 1/2/98 (secured by various U.S. Treasury
Notes with maturities ranging from 7/15/98 through
2/28/02 at various interest rates ranging from 6.25%
to 8.25%, all held at Chase Bank) ................... $7,095,567 7,095,567
-----------
(Cost $28,022,222) 28,022,222
-----------
COMMON STOCKS -- 94.55% SHARES
------
ARGENTINA -- 2.69%
BANKS
Bco Frances Rio Pl.................................. 51,945 482,138
Bco De Galicia Bue "B'.............................. 155,024 992,335
CONSTRUCTION
Astra Cia Argentin.................................. 290,820 509,028
Ciadea Sa........................................... 36,624 47,254
Perez Companc Sa "B'................................ 299,760 2,140,678
Ypf Sa Class "D'.................................... 127,300 4,290,794
FOOD & AGRICULTURE
Molinos Rio Plata "B'............................... 61,742 148,208
LIQUOR & TOBACCO
Ba Embotelladora "B'*............................... 150 2
MISCELLANEOUS
Comercial Del Plata................................. 116,786 184,556
NON-FERROUS METALS
Siderca Sa.......................................... 488,521 1,358,337
Siderar Sa "A'...................................... 18,216 77,432
TELEPHONE
Telefonica De Argentina Class "B'................... 965,600 3,621,663
-----------
13,852,425
-----------
AUSTRALIA -- 1.56%
AIR TRANSPORT
Qantas Airways...................................... 32,000 56,629
BANKS
National Australia Bank............................. 96,820 1,351,903
Westpac Bank Corp................................... 130,510 834,713
CHEMICALS
Ici Australia....................................... 18,853 132,053
CONSTRUCTION
Boral Limited....................................... 68,719 173,727
Csr Limited......................................... 50,166 169,970
Pioneer International............................... 60,480 165,114
ENERGY RAW MATERIAL
Broken Hill Pty..................................... 117,905 1,094,726
Santos Limited...................................... 82,465 339,583
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
89
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
FOOD & AGRICULTURE
Amcor Limited........................................... 50,613 $ 222,600
Goodman Fielder Limited................................. 55,124 87,637
LIQUOR & TOBACCO
Coca-Cola Amatil........................................ 24,724 184,710
Fosters Brewing Gp...................................... 71,247 135,553
Southcorp Holdings...................................... 24,447 80,919
MEDIA
News Corporation (Aust Listing)......................... 120,325 664,046
News Corporation Preferred Limited Voting Shares........ 69,789 345,316
MULTI-INDUSTRY & CONGLOMERATES
Pacific Dunlop Limited.................................. 92,967 196,866
NON-FERROUS METALS
Aberfoyle............................................... 2,400 3,909
Rio Tinto Limited....................................... 35,868 418,400
Mim Holdings Limited.................................... 109,423 67,019
North Ltd............................................... 18,069 47,587
WMC Ltd................................................. 80,894 281,987
RAILROAD & SHIPPING
Brambles Inds Limited................................... 13,527 268,378
REAL PROPPERTY
Gen Property Tst Units (Aust Listing)................... 55,200 97,829
Lend Lease Corp......................................... 9,661 188,843
Westfield Trust Units................................... 25,740 49,140
Westfield Trust New Units............................... 1,012 1,886
RETAIL
Coles Myer Limited...................................... 46,602 223,785
David Jones Limited..................................... 43,000 48,470
Woolworth Limited....................................... 22,434 74,986
-----------
8,008,284
-----------
BELGIUM -- 3.77%
BANKS
Generale De Banque...................................... 5,883 2,560,422
Kredietbank............................................. 4,164 1,747,649
Kredietbank VVPR........................................ 6 2,518
CHEMICALS
Solvay.................................................. 28,640 1,801,117
CONSTRUCTION
Glaverbel Mecansa....................................... 1,500 234,818
ENERGY RAW MATERIALS
GPE Bruxelles Lam....................................... 11,265 1,629,705
ENERGY & UTILITIES
Electrabel.............................................. 14,667 3,392,619
Tractebel Inv Cap....................................... 22,375 1,950,647
Soc Gen Belgique p/wts exp 11/15/99*.................... 2,975 7,628
INSURANCE
Fortis Ag............................................... 13,048 2,722,303
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
90
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
INTERNATIONAL OIL
Petrofina Sa............................................. 5,709 $ 2,107,174
MISCELLANEOUS FINANCE
Soc Gen De Belgique...................................... 932 85,276
NON-FERROUS METALS
Union Miniere*........................................... 7,710 534,811
PRODUCER GOODS
Bekaert Sa............................................... 930 553,483
RETAIL
Delhaize Le Lion......................................... 1,800 91,336
-----------
19,421,506
-----------
BRAZIL -- 2.63%
BANKS
Unibanco Holdings........................................ 52,000 1,673,750
MISCELLANEOUS
Aracruz Celolose ADR..................................... 19,500 280,313
Electrobas ADR........................................... 77,000 1,966,357
PAO De Acucar GDR........................................ 20,000 387,500
Sider Nacional ADR....................................... 6,000 154,875
Cemig Ca Energy ADR...................................... 24,800 1,077,535
Compania Vale ADR........................................ 21,000 422,438
Klabin Fabricadora ADR................................... 8,000 36,558
Multicanal Partici ADR*.................................. 28,000 164,500
Petrol Brasileiros ADR................................... 56,000 1,309,650
TELEPHONE
Telecomunicacoex Brasileiras ADR......................... 52,000 6,054,750
-----------
13,528,226
-----------
CHILI -- 0.40%
BANKS
Banco Santander ADR...................................... 14,000 197,750
ENERGY & UTILITIES
Chilgener Sa ADR......................................... 10,000 245,000
Enersis Sa ADR........................................... 25,000 725,000
TELEPHONE
Compania De Telecommunicaciones Chile ADR................ 30,000 896,250
-----------
2,064,000
-----------
DENMARK -- 3.17%
BANKS
Den Danske Bank.......................................... 16,750 2,233,428
Unidanmark "A' (Regd).................................... 11,735 862,060
BUSINESS MACHINE
Iss International Series "B'*............................ 8,042 295,972
Sophus Berendsen "B'..................................... 6,927 1,143,168
DRUGS & MEDICINE
Novo-Nordisk As "B'...................................... 19,932 2,852,747
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
91
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------- ------------
<S> <C> <C>
FOOD & AGRICULTURE
Danisco................................................. 17,858 $ 991,066
LIQUOR & TOBACCO
Carlsberg "A'........................................... 7,300 394,862
Carlsberg "B'........................................... 6,705 360,357
RAILROAD & SHIPPING
D/S 1912 "B'............................................ 54 2,492,110
D/S Svendborg "B'....................................... 40 2,628,808
TELEPHONE
Tele Danmark AS Series "B'.............................. 33,385 2,072,176
-----------
16,326,754
-----------
FINLAND -- 4.44%
BANKS
Merita Ltd "A'.......................................... 396,000 2,167,080
CONSTRUCTION
Metro AB "A'............................................ 8,600 203,728
Metro AB "B'............................................ 8,600 202,149
Rauma Oy................................................ 8,661 135,192
ELECTRONICS
Nokia (AB) Oy Series "K'................................ 51,200 3,666,892
Nokia (AB) Oy Series "A'................................ 102,000 7,248,942
FOOD & AGRICULTURE
Cultor Oy Series 2...................................... 5,800 314,205
Cultor Oy Series 1...................................... 11,200 608,798
INSURANCE
Pohjola Series "B'...................................... 22,900 849,475
Sampo "A'............................................... 36,400 1,183,146
NON-FERROUS METALS
Outokumpo Oy "A'........................................ 59,800 730,275
PAPER & FOREST PRODUCTS
UPM-"Kymmene Oy......................................... 168,500 3,372,795
PRODUCER GOODS
Kone Corp "B'........................................... 5,400 654,487
RETAIL
Kesko................................................... 62,000 981,437
Stockmann Oy "A'........................................ 5,000 325,958
TRAVEL & RECREATION
Amer Group "A' *........................................ 11,000 211,092
-----------
22,855,651
-----------
FRANCE -- 5.36%
BANKS
Banque National Paris................................... 14,627 777,807
Cie Fin Paribas "A'..................................... 6,021 523,447
Societe Generale........................................ 8,075 1,100,674
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
92
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
CHEMICALS
Air Liquide ("L')........................................ 4,999 $ 782,774
Air Liquide ("L') (Regd)................................. 1,095 171,462
Rhone Poulenc Sa "A'..................................... 22,927 1,027,470
CONSTRUCTION
Cie De St Gobain......................................... 6,784 964,171
Imetal................................................... 1,100 136,772
Lafarge Prime Fidelite '99............................... 800 52,515
Lafarge Ords (Br)........................................ 5,219 342,591
CONSUMER DURABLES
BIC...................................................... 4,200 306,699
Printemps (Av)........................................... 1,250 667,194
DRUGS & MEDICINE
L'Oreal.................................................. 3,828 1,498,528
Sanofi................................................... 6,945 773,480
ELECTRONICS
Alcatel Alsthom (CGE).................................... 9,706 1,234,252
CSF (Thomson)............................................ 6,965 219,629
Legrand.................................................. 1,950 388,648
Schneider Sa (X-SB)...................................... 8,816 478,912
ENERGY & UTILITIES
Eaux (Cie Generale)...................................... 10,173 1,420,465
Eaux (Cie Generale) Wts.................................. 9,995 6,795
Suez Lyonnaise Eaux...................................... 8,904 985,738
FOOD & AGRICULTURE
Danone (Ex Bsn).......................................... 6,313 1,128,097
Eridania Beghin SA....................................... 1,611 251,992
INSURANCE
AXA...................................................... 20,412 1,580,134
INTERNATIONAL OIL
ELF Aquitaine (Soc Nat).................................. 16,072 1,870,123
Total B.................................................. 15,129 1,647,228
LIQUOR & TOBACCO
LVMH Moet-Hennessy....................................... 5,822 966,807
Pernod-Ricard............................................ 3,864 227,375
MEDIA
Canal Plus............................................... 1,584 294,637
Havas.................................................... 2,917 209,955
MULTI-INDUSTRY & CONGLOMERATES
Worms & Cie.............................................. 2,800 207,119
MOTOR VEHICLES
Peugeot SA............................................... 5,723 722,051
MISCELLANEOUS FINANCE
CIE Bancaire............................................. 2,798 453,476
CLF-Dexia France Prime Fid '99........................... 1,540 178,425
NON-FERROUS METALS
Usinor Sacilor........................................... 26,950 389,297
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
93
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
PRODUCER GOODS
Michelin (CGDE) Class "B'............................... 9,937 $ 500,495
Valeo................................................... 3,471 235,521
REAL PROPERTY
Sefimeg (Regd).......................................... 3,836 191,294
RETAIL
Carrefour............................................... 2,579 1,346,118
Casino Guichard-Perrachon............................... 4,250 236,666
Promodes................................................ 1,133 470,274
TRAVEL & RECREATION
Accor................................................... 3,191 593,552
-----------
27,560,659
-----------
GERMANY -- 6.74%
AIR TRANSPORT
Lufthansa Ag............................................ 34,070 640,455
BANKS
Bayer Vereinsbank....................................... 19,240 1,241,261
Deutsche Bank........................................... 34,500 2,413,791
Dresdner Bank........................................... 30,190 1,373,461
CHEMICALS
Basf (Var).............................................. 36,560 1,305,393
Bayer (Var)............................................. 49,770 1,847,646
Schering AG............................................. 5,640 544,225
CONSTRUCTION
Hochtief AG............................................. 11,470 472,058
DRUGS AND MEDICINE
Beiersdorf AG Ser "A B C'............................... 6,200 263,787
ELECTRONICS
Siemens AG.............................................. 35,990 2,171,758
SAP AG.................................................. 4,850 1,471,419
SAP AG N/V Pref......................................... 3,200 1,039,708
ENERGY & UTILITIES
Deutsche Telekom........................................ 120,250 2,227,046
Rwe AG.................................................. 18,460 990,738
Rwe AG N/V Pref......................................... 9,750 417,537
Veba AG................................................. 32,400 2,207,400
INSURANCE
Allianz (Regd).......................................... 13,830 3,568,948
Munchener Ruckvers Reg Vink............................. 5,690 2,164,553
MISCELLANEOUS
Metro AG................................................ 18,091 641,923
MOTOR VEHICLES
Daimler-Benz AG (Var)................................... 30,890 2,181,833
Volkswagen AG (Var)..................................... 2,106 1,177,130
PRODUCER GOODS
Linde................................................... 556 337,365
Mannesmann (Var)........................................ 2,826 1,419,253
Man AG Non Vtg Pref(Var)................................ 1,500 340,370
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
94
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
STEEL
Preussag Br (Var)....................................... 2,594 $ 797,802
Thyssen................................................. 2,466 526,653
Viag (Var).............................................. 1,623 889,108
-----------
34,672,621
-----------
HONG KONG -- 1.49%
AIR TRANSPORT
Cathay Pacific Airways.................................. 127,000 103,262
BANKS
Bank of East Asia....................................... 8,716 20,417
Hang Seng Bank.......................................... 100,800 972,450
ENERGY & UTILITIES
China Light & Power..................................... 96,700 536,649
Hong Kong Electric...................................... 20,000 76,017
Hong Kong & China Gas................................... 259,123 501,641
MULTI-INDUSTRY & CONGLOMERATES
Hutchinson Whampoa...................................... 191,000 1,198,022
MISCELLANEOUS FINANCE
Guoco Group............................................. 6,000 14,674
Swire Pacific "A'....................................... 90,500 496,401
Wharf (Holdings)........................................ 101,000 221,598
Wing Lung Bank.......................................... 53,540 256,358
REAL PROPERTY
Cheung Kong (Holdings).................................. 129,000 844,931
Hopewell Holdings....................................... 217,000 54,052
Hysan Development....................................... 60,000 119,640
New World Development Co................................ 82,089 283,933
Sun Hung Kai Properties................................. 110,700 771,502
TELEPHONE
Hong Kong Telecomm...................................... 587,896 1,210,198
-----------
7,681,745
-----------
IRELAND -- 4.21%
BANKS
Allied Irish Banks...................................... 471,401 4,568,932
Bank of Ireland (Dublin Listing)........................ 187,790 2,896,110
CONSTRUCTION
CRH..................................................... 409,887 4,802,323
FOOD & AGRICULTURE
Greencore Group......................................... 235,322 1,106,858
Kerry Group "A'......................................... 162,538 1,739,844
INSURANCE
Irish Life.............................................. 328,549 1,887,211
MEDIA
Independent News (Dublin Listing)....................... 273,187 1,499,119
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
95
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
PAPER & FOREST PRODUCTS
Smurfit (Jefferson)................................... 24,000 $ 66,738
Smurfit(Jefferson) (Dublin Listing)................... 1,097,051 3,096,046
-----------
21,663,181
-----------
JAPAN -- 13.20%
AIR TRANSPORT
Japan Airlines Co*.................................... 110,000 300,336
BANKS
Asahi Bank............................................ 114,000 464,694
Bank of Tokyo MITS--Ex Mitsubishi Bank................ 156,000 2,159,649
Dai-Ichi Kangyo Bank.................................. 155,000 917,928
Fuji Bank............................................. 144,000 584,767
Industrial Bank of Japan.............................. 106,000 758,185
Joyo Bank............................................. 62,000 219,349
Sakura Bank........................................... 127,000 364,333
Sumitomo Bank......................................... 150,000 1,718,952
Tokai Bank............................................ 97,000 453,588
BUSINESS MACHINES
Canon Inc............................................. 59,000 1,379,469
Fujitsu............................................... 128,000 1,378,238
Ricoh................................................. 75,000 934,464
CHEMICALS
Asahi Chemical Industries............................. 140,000 475,923
Dainippon Ink & Chemical.............................. 82,000 208,120
Mitsubishi Gas Chemical............................... 34,000 89,693
Sekisui Chemical...................................... 40,000 203,967
Shin-Etsu Chemical.................................... 32,000 612,824
Showa Denko Kk*....................................... 131,000 114,858
Sumitomo Chemical..................................... 135,000 311,488
Toray Industries Inc.................................. 147,000 661,393
CONSTRUCTION
Chichibu Onoda Cement................................. 67,000 123,672
Daiwa House Industry.................................. 60,000 318,410
Haseko Corp*.......................................... 136,000 70,081
Kajima Corp........................................... 36,000 91,093
Nihon Cement Co....................................... 34,000 70,342
Obayashi Corp......................................... 35,000 119,519
Sekisui House......................................... 137,000 884,034
Shimizu Corp.......................................... 56,000 130,071
Taisei Corp........................................... 73,000 120,150
Toto.................................................. 40,000 256,574
CONSUMER DURABLES
Matsushita Electric Industries........................ 172,000 2,526,667
Sanyo Electric Co..................................... 154,000 402,704
Sharp Corp............................................ 63,000 435,114
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
96
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------- ------------
<S> <C> <C>
DRUGS & MEDICINE
Daiichi Pharm Co........................................ 56,000 $ 633,128
Sankyo Co............................................... 58,000 1,315,940
Takeda Chemical Industries.............................. 90,000 2,574,967
ELECTRONICS
Hitachi................................................. 233,000 1,666,576
Kyocera................................................. 17,000 774,028
Mitsubishi Electric Corp................................ 125,000 321,102
Omron Corp.............................................. 36,000 564,831
Sony.................................................... 39,500 3,524,043
ENERGY & UTILITIES
Kansai Electric Power................................... 59,100 1,004,537
Osaka Gas Co............................................ 271,000 621,115
Tokyo Electric Power.................................... 102,300 1,872,573
Tokyo Gas Co............................................ 137,000 311,888
FOOD & AGRICULTURE
Ajinomoto Co............................................ 74,000 722,806
INTERNATIONAL OIL
Japan Energy Corp....................................... 138,000 130,548
Nippon Oil Co........................................... 120,000 311,026
MEDIA
Dai Nippon Printing..................................... 74,000 1,394,389
MULTI-INDUSTRY
Itochu Corp............................................. 167,000 263,303
Marubeni Corp........................................... 208,000 366,341
Mitsubishi.............................................. 78,000 617,900
Sumitomo Corp........................................... 74,000 415,471
MISCELLANEOUS FINANCE
Daiwa Securities........................................ 149,000 515,686
Mitsubishi Trust & Banking.............................. 50,000 503,764
Nomura Securities....................................... 127,000 1,699,570
MOTOR VEHICLES
Honda Motor Co.......................................... 64,000 2,357,771
Nissan Motor Co......................................... 131,000 544,066
Toyota Motor Corp....................................... 186,000 5,350,209
NON-FERROUS METALS
Tostem Corp............................................. 19,000 204,582
PAPER & FOREST PRODUCTS
Daishowa Paper Manufacturing*........................... 13,000 71,988
Oji Paper Co............................................ 48,000 191,600
PRODUCER GOODS
Bridgestone Corp........................................ 53,000 1,153,582
Komatsu................................................. 70,000 352,635
Kubota Corp............................................. 136,000 359,819
Mitsubishi Heavy Industries............................. 247,000 1,033,432
Denso Corp.............................................. 61,000 1,102,513
Sumitomo Heavy Industries............................... 83,000 254,705
Toyo Seikan Kaisha...................................... 15,000 214,581
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
97
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
RAILROADS & SHIPPING
East Japan Railway...................................... 38 $ 172,141
Hankyu Corp............................................. 89,000 418,232
Mitsui Osk Lines*....................................... 94,000 130,856
Nagoya Railroad Co...................................... 98,000 337,668
Tokyu Corp.............................................. 148,000 573,692
REAL PROPERTY
Mitsubishi Estate....................................... 153,000 1,670,960
RETAIL
Ito-Yokado Co........................................... 38,000 1,943,531
Mycal Corp.............................................. 78,000 653,894
Seven-Elevan Japan Npv.................................. 28,000 1,989,831
STEEL
Kawasaki Steel Corp..................................... 131,000 179,340
Kobe Steel*............................................. 142,000 114,674
Nippon Steel Corp....................................... 341,000 506,172
NKK Corp................................................ 139,000 111,182
Sumitomo Metal Industries............................... 262,000 336,515
TELEPHONE
Nippon Tel & Tel........................................ 344 2,963,211
TRAVEL & RECREATION
Fuji Photo Film......................................... 14,000 538,374
Nikon................................................... 13,000 128,979
-----------
67,946,916
-----------
MALAYSIA -- 0.61%
AIR TRANSPORT
Malaysian Airline Systems............................... 42,000 33,666
BANKS
Ammb Holdings Berhad.................................... 66,000 43,238
Commerce Asset Holding.................................. 21,600 10,322
RHB Capital............................................. 114,000 55,062
Malayan Bkg Berhad...................................... 88,000 255,473
Public Bank Berhad (Alien Market)....................... 295,999 101,902
CONSTRUCTION
Hume Inds (M) Berhad.................................... 44,000 46,121
United Engineers Berhad................................. 88,000 73,251
YTL Corp................................................ 9,000 12,139
YTL Corp Wts (expire 9/30/02)*.......................... 600 244
CONSUMER DURABLES
Tech Res Inds Berhad.................................... 115,000 67,954
ENERGY & UTILITIES
Tenaga Nasional......................................... 175,000 373,166
FOOD & AGRICULTURE
Golden Hope Plants...................................... 159,000 183,820
Kuala Lumpur Kepg....................................... 19,000 40,759
Nestle Malay Berhad..................................... 22,000 101,738
LIQUOR & TOBACCO
Rothmans Pall Mall...................................... 17,000 132,118
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
98
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
MOTOR VEHICLES
Edaran Otomobil....................................... 86,000 $ 175,652
MULTI-INDUSTRY & CONGLOMERATES
Malayan Utd Inds...................................... 551,600 96,365
Sime Darby Berhad..................................... 147,200 141,438
PRODUCER GOODS
Leader Univ Holdings.................................. 191,333 58,987
RAILROAD & SHIPPING
Malaysian Int Ship (Alien Market)..................... 37,000 54,183
REAL PROPERTY
Hong Leong Properties................................. 212,000 38,671
Land & General........................................ 20,000 3,700
STEEL
Sungei Way Holdings................................... 170,000 55,031
TELEPHONE
Telekom Malaysia...................................... 215,000 635,218
TRAVEL & RECREATION
Landmarks Berhad...................................... 108,000 15,816
Magnum Corp Berhad.................................... 354,250 212,966
Resorts World Berhad.................................. 75,000 126,209
----------
3,145,209
----------
MEXICO -- 5.45%
BANKS
Gpo Financiero Banamex-Ac Series "B'*................. 384,000 1,147,931
Gpo Financiero Banamex-Ac Series "L'*................. 109,017 281,271
CONSTRUCTION
Cemex Sa Ser "A'*..................................... 383,937 1,740,664
FOOD & AGRICULTURE
Grupo Ind Bimbo Series "A'............................ 142,000 1,347,464
Gpo Modelo Sa de C Ser "C' (Mexican)*................. 218,200 1,837,774
LIQUOR & TOBACCO
Empresas La Modern "A'*............................... 153,500 837,777
MEDIA
Fomento Economico Mexico Series "B'................... 167,100 1,334,842
Grupo Televisa Ptg Certs Repr 1 A,L,D Shs*............ 90,200 1,755,485
MISCELLANEOUS FINANCE
Grupo Carso Ser "A1'.................................. 282,900 1,884,408
Grupo Financiero Bancomer Series "B'*................. 1,756,800 1,141,882
MULTI-INDUSTRY
Desc Sa de Cv Ser "B'*................................ 149,100 1,412,988
Apasco Sa Com (Mexican)............................... 79,900 548,074
GPO Mexico Ser "B' (Mexican).......................... 203,300 746,443
MULTI-INDUSTRY & CONGLOMERATES
Alfa Sa Series "A' (Cpo).............................. 259,601 1,758,193
NON-FERROUS METALS
Industrias Penoles.................................... 164,000 730,308
PAPER & FOREST PRODUCTS
Kimberly Clark Mexico "A'............................. 474,500 2,248,367
</TABLE>
See Notes to Financial Statements
Pegasus Funds
99
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
RETAIL
Cifra Sa De Cv Series "V'............................. 774,651 $ 1,902,562
TELEPHONE
Telefonos De Mexico Series "L' (Ltd Vtg).............. 1,917,300 5,410,520
-----------
28,066,953
-----------
NETHERLANDS -- 5.24%
AIR TRANSPORT
KLM................................................... 10,016 370,555
BANKS
ABN Amro Holding Nv................................... 113,128 2,204,270
CHEMICALS
Akzo Nobel Nv......................................... 8,742 1,507,578
CONSTRUCTION
Hollandsche Benton.................................... 10,000 185,968
ELECTRONICS
Philips Electronic.................................... 26,861 1,611,215
FOOD & AGRICULTURE
Ahold (kon) Nv........................................ 36,893 962,714
INSURANCE
ING Groep Nv Cva...................................... 70,584 2,973,458
INTERNATIONAL OIL
Royal Dutch Petroleum (Br)............................ 147,364 8,090,664
Royal Dutch Petroleum NY Registry..................... 16,800 910,350
LIQUOR & TOBACCO
Heineken Nv........................................... 3,181 553,906
MEDIA
Elsevier Nv........................................... 74,349 1,202,947
Wolters Kluwer Cva.................................... 5,473 707,064
MISCELLANEOUS
Oce Nv................................................ 1,500 163,524
Unilever Nv Cva....................................... 57,108 3,521,313
PAPER & FOREST PRODUCTS
KNP BT (Kon) Nv....................................... 7,455 171,736
STEEL
Kon Hoogovens Nv Cva.................................. 3,715 152,285
TELEPHONE
Kon Ptt Nederland..................................... 39,598 1,652,499
-----------
26,942,046
-----------
NORWAY -- 3.74%
AIR TRANSPORT
Helicopter Service.................................... 6,000 73,248
BANKS
Den Norske Bank....................................... 115,000 542,851
Christiana Bank....................................... 70,000 282,955
CHEMICALS
Dyno Industrier....................................... 18,700 360,192
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
100
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
CONSTRUCTION
Aker AS "B'........................................... 10,500 $ 170,913
DRUGS & MEDICINE
Nycomed Amersham Non-voting*.......................... 18,456 670,928
Nycomed Amersham *.................................... 24,729 929,159
ENERGY & UTILITIES
Hafslund Ser "A'...................................... 49,997 305,183
Hafslund Ser "B'...................................... 30,219 144,287
FOOD & AGRICULTURE
Orkla AS "A'.......................................... 25,757 2,218,568
Orkla AS "B'.......................................... 7,350 572,272
INSURANCE
Storebrand Asa "A'*................................... 159,650 1,126,097
INTERNATIONAL OIL
Norsk Hydro AS........................................ 124,670 6,079,451
MISCELLANEOUS
Transocean Offshore................................... 4,000 176,338
MOTOR VEHICLES
Petroleum Geo Svs*.................................... 17,412 1,098,260
NON-FERROUS METALS
Elkem Asa............................................. 27,248 362,213
PAPER & FOREST PRODUCTS
Norske Skogsindust "A'................................ 16,700 484,768
PRODUCER GOODS
Aker Asa Ser "A'...................................... 26,100 470,864
Kvaerner AS Series "A'................................ 20,600 1,050,651
Kvaerner AS Series "B'................................ 7,900 367,557
RAILROAD & SHIPPING
Bergesen Dy AS "A'.................................... 36,050 850,860
Bergesen Dy AS "B' Non-Voting......................... 15,150 353,464
Bona Shipholding*..................................... 1,537 15,636
Leif Hoegh & Co....................................... 18,447 375,336
Unitor AS............................................. 11,600 141,613
-----------
19,223,664
-----------
SINGAPORE -- 2.79%
AIR TRANSPORT
Singapore Airlines (Alien Market)..................... 329,000 2,147,852
BANKS
Dev Bank Singapore (Alien Market)..................... 188,250 1,608,842
Overseas Chinese Bank (Alien Market).................. 229,299 1,333,657
United Overseas Bank (Alien Market)................... 264,404 1,467,221
CONSUMER DURABLES
Jardine Matheson...................................... 4,100 20,910
ELECTRONICS
Creative Technology*.................................. 15,000 304,462
ENERGY & UTILITIES
Singapore Telecom..................................... 1,248,000 2,325,734
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
101
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
LIQUOR & TOBACCO
Fraser & Neave.......................................... 87,400 $ 378,661
Straits Trading Co...................................... 127,000 150,747
MEDIA
Singapore Press Holdings (Alien Market)................. 65,800 823,994
MOTOR VEHICLES
Cycle & Carriage........................................ 102,000 420,727
MISCELLANEOUS
Singapore Tech Ind...................................... 160,000 152,884
MULTI-INDUSTRY & CONGLOMERATES
Keppel Land Ltd......................................... 114,000 156,967
PRODUCER GOODS
Keppel Corp............................................. 350,750 1,007,532
REAL PROPERTY
City Developments....................................... 330,600 1,530,429
DBS Land................................................ 328,000 502,238
-----------
14,332,857
-----------
SPAIN -- 5.28%
BANKS
Argentaria Corp Bc...................................... 22,133 1,346,143
Banco Bilbao Vizcaya (Regd)............................. 123,510 3,995,031
Banco Central Hispan (Regd)............................. 60,668 1,476,742
Banco Santander (Regd).................................. 85,827 2,866,242
CONSTRUCTION
Fomento Const Y Contra.................................. 15,656 595,772
ENERGY & UTILITIES
Endesa Sa (Regd)........................................ 181,632 3,223,523
Gas Natural Sdg Sa...................................... 25,444 1,318,814
Iberdrola Sa............................................ 138,600 1,823,261
Union Electrical Fenosa................................. 64,228 615,245
INSURANCE
Corporation Mapfre...................................... 16,992 450,399
INTERNATIONAL OIL
Repsol Sa............................................... 52,224 2,227,177
LIQUOR & TOBACCO
Tabacalera Sa Series "A' (Regd)......................... 7,489 606,823
NON-FERROUS METALS
Acerinox Sa (Regd)...................................... 2,627 389,012
PRODUCER GOODS
Zardoya-Otis............................................ 4,532 527,788
RAILROADS & SHIPPING
Autopistas Cesa......................................... 52,811 708,580
REAL PROPERTY
Vallehermoso Sa......................................... 9,664 296,104
TELEPHONE
Telefonica De Espana.................................... 164,201 4,686,366
-----------
27,153,022
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
102
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
SWEDEN -- 1.29%
APPAREL
Hennes & Mauritz Ser "B'................................. 14,000 $ 617,567
BANKS
Svenska Handelsbkn Ser "A'............................... 29,000 1,003,294
DRUGS & MEDICINE
Astra AB Ser "A'......................................... 75,000 1,299,726
ELECTRONICS
Ericsson (LM) Tel........................................ 50,000 1,881,060
MOTOR VEHICLES
Volvo (AB)............................................... 18,000 483,215
PAPER & FOREST PRODUCTS
Mo Och Domsjo AB Ser "B'................................. 5,000 129,185
Stora Kopparbergs Ser "A'................................ 50,000 630,170
RAILROADS & SHIPPING
ABB Ser "A'.............................................. 51,000 604,207
-----------
6,648,424
-----------
SWITZERLAND -- 4.05%
BANKS
Credit Suisse Group (Regd)............................... 9,524 1,475,728
Schweiz Bangesellsch (Br)................................ 1,068 1,546,477
Schweiz Bangesellsch (Regd).............................. 1,052 303,652
Schweiz Bankverein (Regd)................................ 4,100 1,276,198
CONSTRUCTION
Holderbank Fn Glarus (Br)................................ 558 456,025
CONSUMER DURABLES
Smh Ag Neuenburg (Regd).................................. 725 97,923
Smh Ag Neuenburg (Br).................................... 165 91,180
DRUGS & MEDICINE
Roche Holdings Genusscheine Npv.......................... 343 3,411,066
Roche Holdings (Br)...................................... 80 1,234,102
Novartis Ag (Regd)....................................... 2,171 3,527,659
Novartis Ag (Br)......................................... 970 1,579,479
ELECTRONICS
Abb (Br)................................................. 450 566,144
Adecco Sa (Br)........................................... 135 39,198
Sgs Holding (Br)......................................... 79 151,657
FOOD & AGRICULTURE
Nestle Sa (Regd)......................................... 1,874 2,812,508
Valora Holding Ag........................................ 80 16,893
INSURANCE
Schw Ruckversicher (Regd)................................ 30 56,193
Zurich Versicherun (Regd)................................ 4,094 1,953,599
NON-FERROUS METALS
Alusuisse-Lonza Holdings (Regd).......................... 248 238,555
PRODUCER GOODS
Sulzer Ag Ptg............................................ 13 8,253
-----------
20,842,489
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
103
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
THAILAND -- 0.47%
BANKS
Bk of Ayudhya (Alien Market)............................ 89,000 $ 36,045
Bangkok Bank (Fr)....................................... 169,100 421,445
Ind Fin Corp Thail (Alien Market)....................... 159,100 24,452
Siam Commercial Bank (Alien Market)..................... 111,333 127,175
Siam Commercial Bank Wts (expire 12/31/02)*............. 27,833 0
Thai Farmers Bank (Alien Market)........................ 220,400 400,531
CONSTRUCTION
Siam Cement (Fr)........................................ 37,600 296,748
Tipco Asphalt (Alien Market)............................ 26,500 18,988
ENERGY AND MATERIALS
PTT Explortn & Prd (Alien Market)....................... 72,200 830,737
INTERNATIONAL OIL
Banpu Co (Alien Market)................................. 13,000 52,110
MISCELLANEOUS FINANCE
Phatra Thanakit Co (Alien Market)....................... 134,400 74,669
TELEPHONE
Shinawatra C & Comms.................................... 32,900 109,328
Utd Commns Indust (Alien Market)........................ 79,900 32,359
----------
2,424,587
----------
UNITED KINGDOM -- 15.97%
AIR TRANSPORT
British Airways......................................... 82,877 813,423
AEROSPACE
British Aerospace....................................... 20,774 595,102
BANKS
Abbey National.......................................... 71,613 1,236,060
Barclays................................................ 115,565 3,070,938
HSBC Holdings (UK Regd)................................. 85,460 2,117,679
HSBC Holdings (UK Regd)................................. 159,651 4,126,863
LLoyds Bank............................................. 364,360 4,712,218
CHEMICALS
BOC Group............................................... 40,408 669,196
Imperial Chemical Industries............................ 77,314 1,195,799
CONSTRUCTION
English China Clay...................................... 44,238 195,803
Hanson.................................................. 69,197 310,260
RMC Group............................................... 26,670 376,515
Redland................................................. 123,016 695,281
Taylor Woodrow.......................................... 109,591 321,874
DRUGS & MEDICINE
Glaxo Welcome Ord....................................... 210,829 4,988,402
Smithkline Beecham...................................... 347,160 3,572,968
Zeneca Group............................................ 57,538 2,026,006
ELECTRONICS
General Electric Co..................................... 227,008 1,490,343
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
104
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
ENERGY & UTILITIES
British Gas............................................. 284,572 $1,282,965
Centrica*............................................... 254,516 368,528
Energy Group............................................ 61,814 686,027
National Power.......................................... 78,850 781,683
Scottish Power.......................................... 22,356 197,349
Thames Water............................................ 63,355 949,667
FOOD & AGRICULTURE
Associated British Foods................................ 66,299 568,351
Cadbury Schweppes....................................... 54,993 547,438
Kingfisher.............................................. 48,396 675,270
Sainsbury (J)........................................... 126,210 1,058,060
Tesco................................................... 158,205 1,275,523
Unilever Ord............................................ 229,704 1,971,038
INSURANCE
Prudential Corp......................................... 197,160 2,291,940
Royal & Sun Alliance.................................... 147,158 1,477,018
INTERNATIONAL OIL
British Petroleum....................................... 395,489 5,209,163
LIQUOR & TOBACCO
BAT Industries.......................................... 214,180 1,954,126
Bass.................................................... 75,324 1,160,063
Diageo Ord.............................................. 397,481 3,652,680
Imperial Tobacco........................................ 31,370 198,207
Safeway................................................. 150,780 855,924
MEDIA
British Sky Broadcasting................................ 94,124 703,118
Carlton Communications.................................. 56,450 434,692
Reed International...................................... 40,000 389,960
Reuters Holdings........................................ 173,821 1,911,947
PRODUCER GOODS
BTR..................................................... 317,897 975,523
Rio Tinto............................................... 95,719 1,111,136
Rolls Royce............................................. 124,074 469,549
Smiths Industries....................................... 42,710 608,231
REAL PROPERTY
MEPC.................................................... 124,143 1,040,731
RETAIL
Argos................................................... 30,245 274,206
Boots Co................................................ 62,274 904,773
Great Univ Stores....................................... 68,436 844,536
Marks & Spencer......................................... 211,891 2,088,390
Sears................................................... 237,891 205,499
STEEL
British Steel........................................... 232,983 505,065
TELEPHONE
British Telecom......................................... 428,698 3,384,064
Cable & Wireless........................................ 179,538 1,578,979
Vodafone Group.......................................... 278,223 2,030,294
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
105
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TRAVEL & RECREATION
EMI Group............................................... 51,062 440,462
Granada Gp.............................................. 80,310 1,238,173
Ladbroke Group.......................................... 199,568 866,896
Rank Group.............................................. 86,224 494,783
Thorn................................................... 28,368 8,869
------------
82,185,626
------------
TOTAL COMMON STOCKS....................................... 486,546,845
------------
(Cost $434,564,989)
TOTAL INVESTMENTS......................................... $514,569,067
============
(Cost $462,587,211)
</TABLE>
*Non-income producing security
See Notes to Financial Statements.
Pegasus Funds
106
<PAGE>
PEGASUS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(A) FORWARD FOREIGN CURRENCY CONTRACTS
As of December 31, 1997, the Fund had entered into one forward foreign
currency exchange contract that obligates the Fund to deliver currencies at
specified future dates.
Outstanding contract as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR U.S. DOLLAR UNREALIZED
CURRENCY TO VALUE AS OF CURRENCY TO VALUE AS OF APPRECIATION
SETTLEMENT DATE BE DELIVERED DEC. 31, 1997 BE RECEIVED DEC. 31, 1997 AT 12/31/97
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 31, 1998.......... 10,000,000 $5,914,710 6,581,112 $6,581,112 $666,402
Singapore Dollars U.S. Dollars
</TABLE>
(B) FINANCIAL FUTURES CONTRACTS
Oustanding contract as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
NUMBER OF EXPIRATION COVERED BY DEPRECIATION
TYPE CONTRACTS DATE CONTRACTS AT 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Futures purchased
long:
Japanese Yen -- TOPIX *.... 175 March 13, 1998 $16,030,092 ($711,731)
</TABLE>
*Exchange traded local currency denominated futures contracts.
See Notes to Financial Statements.
Pegasus Funds
107
<PAGE>
PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 0.18%
Pegasus Cash Management Fund Class I (in shares)..... 945,644 $ 945,644
(Cost $945,644)
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 78.74%
U.S. Treasury Securities -- 40.52%
Strips from U.S. Treasury Securities due:
5/15/98............................................ $ 6,600,000 6,470,178
11/15/98........................................... 7,600,000 7,245,384
2/15/99............................................ 9,660,000 9,076,343
2/15/01............................................ 3,300,000 2,769,294
8/15/01............................................ 2,250,000 1,833,907
8/15/08............................................ 5,350,000 2,879,263
11/15/10........................................... 5,000,000 2,335,250
U.S. Treasury Bonds:
12.75%, 11/15/10................................... 25,426,000 36,291,547
10.375%, 11/15/12.................................. 7,765,000 10,317,744
12.50%, 8/15/14.................................... 1,000,000 1,545,780
U.S. Treasury Notes:
8.125%, 2/15/98.................................... 8,300,000 8,322,078
5.125%, 4/30/98.................................... 3,320,000 3,315,850
7.00%, 4/15/99..................................... 1,000,000 1,016,560
9.125%, 5/15/99.................................... 8,700,000 9,090,108
6.875%, 7/31/99.................................... 8,000,000 8,142,480
7.75%, 11/30/99.................................... 31,000,000 32,147,930
7.75%, 1/31/00..................................... 3,000,000 3,120,000
7.125%, 2/29/00.................................... 35,900,000 36,937,869
6.25%, 05/31/00.................................... 2,900,000 2,936,250
8.75%, 08/15/00.................................... 21,350,000 22,911,112
7.25%, 5/15/04..................................... 1,000,000 1,079,220
3.375%, 1/15/07 Inflation Protection Series........ 1,223,868 1,191,741
------------
(Cost $207,793,214) 210,975,888
------------
Agency Obligations -- 38.22%
Federal Home Loan Mortgage Corp. Participation Ctf.:
#170269,12.00%, 8/1/15............................. 947,804 1,070,904
#252600, 7.50%, 9/1/08............................. 188,787 192,937
#252601, 8.00%, 6/1/01............................. 196,442 198,026
#555238, 12.00%, 7/1/19............................ 413,901 467,637
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 10 Class D, 10.00%, 7/15/18................. 235,972 236,406
Series 11 Class D, 9.50%, 7/15/19.................. 1,300,000 1,437,433
Series 23 Class E, 9.40%, 8/15/19.................. 196,153 199,709
Series G-29 Class SD, AR, IO, 4/25/24.............. 9,542,812 315,228
Series 30 Class C, 9.50%, 5/15/18.................. 19,874 19,874
Series 38 Class C, 9.50%, 1/15/19.................. 53,246 53,436
Series 39 Class E, 10.00%, 10/15/19................ 78,659 78,651
Series 41 Class I, HB, 84.00%, 5/15/20............. 63,018 200,396
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
108
<PAGE>
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION FACE AMOUNT VALUE
----------- ----------- ------
<S> <C> <C>
Series 47 Class F, 10.00%, 6/15/20.................. $ 500,000 $ 546,087
Series 99 Class Z, 9.50%, 1/15/21................... 1,342,016 1,436,055
Series 204 Class E, HB, IF, 5/15/23................. 6,900 162,447
Series 1072 Class A, HB, 1008.50%, 5/15/06.......... 13,947 308,450
Series 1079 Class S, IF, 5/15/21.................... 664,892 761,110
Series 1084 Class F, AR, 5/15/21.................... 466,339 475,725
Series 1084 Class S, IF, 5/15/21.................... 326,437 424,514
Series 1098 Class M, HB, 10.08%, 6/15/06............ 2,160 48,347
Series 1144 Class KB, 8.50%, 9/15/21................ 2,250,000 2,396,072
Series 1172 Class L, HB, 1167.776%, 11/15/21........ 13,146 397,418
Series 1196 Class B, HB, IF, 1/15/22................ 37,391 508,605
Series 1295 Class JB, 4.50%, 3/15/07................ 1,500,000 1,405,800
Series 1298 Class L, HB, 981.87%, 6/15/07........... 6,000 209,151
Series 1329 Class S, IO, IF, 8/15/99................ 2,870,461 116,598
Series 1389 Class SA, IF, 10/15/07.................. 403,027 333,644
Series 1414 Class LB, IF, 11/15/07.................. 1,146,258 1,150,618
Series 1418 Class B, 6.50%, 11/15/19................ 1,250,000 1,252,212
Series 1465 Class SA, IO, IF, 02/15/08.............. 14,226,998 665,155
Series 1470 Class F, AR, 5.819%, 02/15/23........... 907,393 892,672
Series 1483 Class FB, AR, 12/15/22.................. 2,932,236 2,957,813
Series 1489 Class L, 5.50%, 4/15/08................. 558,129 550,549
Series 1506 Class F, AR, 5/15/08.................... 1,724,493 1,729,356
Series 1506 Class SD, IO, IF, 5/15/08............... 8,279,425 459,061
Series 1506 Class S, IF, 05/15/08................... 294,563 283,433
Series 1531 Class K, 6.00%, 4/15/08................. 1,030,063 1,006,063
Series 1583 Class NS, IF, 9/15/23................... 982,727 834,386
Series 1586 Class A, 6.00%, 9/15/08................. 1,189,412 1,180,745
Series 1589 Class Z, 6.25%, 9/15/23................. 6,516,736 5,978,160
Series 1595 Class S, IO, IF, 10/15/13............... 14,863,241 681,494
Series 1603 Class IF, AR, 1/15/23................... 3,000,000 3,059,511
Series 1628 Class S, IF, 12/15/23................... 2,500,000 1,772,640
Series 1635 Class O, AR, 12/15/08................... 2,231,333 2,233,937
Series 1640 Class A, 5.50%, 10/15/07................ 1,404,307 1,384,300
Series 1646 Class MB, AR, 10/15/22.................. 1,285,681 1,258,798
Series 1647 Class FB, AR, 12/15/08.................. 663,914 654,053
Series 1647 Class SB, IF, 12/15/08.................. 1,239,307 1,225,516
Series 1655 Class F, AR, 12/15/08................... 1,855,157 1,885,682
Series 1655 Class SA, IF, 12/15/08.................. 223,945 194,576
Series 1689 Class SD, IF, 10/15/23.................. 1,500,000 1,388,489
Series 1694 Class SE, IF, 5/15/23................... 960,950 920,045
Series 1700 Class GA, PO, 2/15/24................... 2,274,398 1,320,176
Series 1723 Class F, AR, 05/15/24................... 1,457,278 1,447,258
Series 1796-A, Class S, IF, 2/15/09................. 1,391,843 1,255,799
Series 1807 Class G, 9.00%, 1/1/06.................. 955,959 1,016,574
Series 1849 Class A, PO, 12/15/08................... 1,000,000 627,474
Series 1854 Class SE, IO, IF, 12/15/23.............. 2,500,000 690,017
Series 1859 Class SB, IO, AR, 10/15/23.............. 6,760,000 1,663,852
Series 1900 Class FA, AR, 03/15/09.................. 3,000,000 3,015,015
Series 1900 Class I, PO, 10/15/08................... 983,396 739,035
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
109
<PAGE>
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION FACE AMOUNT VALUE
----------- ----------- ------
<S> <C> <C>
Series 1927 Class F, AR, 10/15/23................... $ 4,225,816 $ 4,252,713
Series 1956 Class A, 7.00%, 12/20/21................ 1,419,811 1,431,094
Series 1993 Class SJ, IF, IO, 03/15/12.............. 5,761,337 550,997
Federal Housing Administration Project #07335307,
7.43%, 1/1/22....................................... 972,265 1,002,988
Federal Housing Administration Greystone 1996-2, 7.43
%, 11/1/22.......................................... 1,921,611 1,981,411
Federal National Mortgage Assn. Mortgage Backed
Securities Stripped Trust 50, Class 2, IO, 10.50%,
3/25/19............................................. 179,815 56,152
Federal National Mortgage Assn. Pass Thru Securities:
Guaranteed REMIC Trust:
1988 Class 7-Z, 9.25%, 4/25/18...................... 518,291 552,705
1988 Class 17-B, 9.40%, 10/25/17.................... 41,402 42,091
1989 Class 26-D, 10.00%, 5/25/04.................... 560,784 590,198
1989 Class 27-D, 10.00%, 1/25/16.................... 219,993 221,097
1989 Class 70-G, 8.00%, 10/25/19.................... 2,000,000 2,103,760
1989 Class 73-C, PO, 10/25/19....................... 207,672 186,554
1989 Class 78-H, 9.40%, 11/25/19.................... 1,750,000 1,938,867
1990 Class 1-D, 8.80%, 1/25/20...................... 727,091 777,967
1990 Class 60-K, 5.50%, 6/25/20..................... 1,063,945 1,028,544
1990 Class 63-H, 9.50%, 6/25/20..................... 755,000 826,962
1990 Class 93-G, 5.50%, 8/25/20..................... 1,071,346 1,034,899
1990 Class 94-H, HB, 505.00%, 8/25/20............... 16,280 256,275
1990 Class 95-J, HB, 1118.04%, 8/25/20.............. 7,197 286,553
1990 Class 102-J, 6.50%, 8/25/20.................... 3,771,216 3,738,693
1990 Class 120-H, 9.00%, 10/25/20................... 900,000 986,249
1990 Class 134-SC, IF, 11/25/20..................... 453,050 513,652
1990 Class 140-K, HB, 652.145%, 12/25/20............ 14,295 433,830
1991 Class 4-N, HB, 758.75%, 1/25/06................ 2,182 36,910
1991 Class 7-K, HB, 908.50%, 2/25/21................ 1,227 34,182
1991 Class 20-M, HB, 908.75%, 3/25/06............... 1,200 23,496
1991 Class 33-J, HB, 1008.25%, 4/25/06.............. 2,765 61,676
1991 Class 161-H, 7.50%, 2/25/21.................... 295,668 298,347
1992 Class 13-S, HB, IF, 1/25/99.................... 5,805 29,283
1992-G Class 27-SQ, HB, IF, 5/25/22................. 250,297 435,517
1992 Class 66-JB, 5.00%, 11/25/21................... 2,800,000 2,476,580
1992 Class 85S, IF, 06/25/99........................ 760,523 812,527
1992 Class 137-BA, 3.50%, 1/25/17................... 955,753 931,758
1992 Class 199-S, IO, IF, 11/25/99.................. 5,883,692 225,192
1992 Class 204-B, 6.00%, 10/25/20................... 2,000,000 1,975,040
1992 Class 206-FA, AR, 06/25/18..................... 1,250,000 1,209,789
1992 Class 215-PM, 7.875%, 11/25/21................. 1,200,000 1,289,903
1993 Class 8-SB, IO, IF, 8/25/06.................... 7,286,062 328,164
1993 Class 12-S, IO, 6.25%, 2/25/23................. 3,201,793 192,569
1993 Class 12-SB, HB, IF, 2/25/23................... 35,314 291,242
1993 Class 19-G, 5.00%, 5/25/19..................... 3,530,000 3,408,762
1993 Class 38-S, IO, IF, 2.755%, 11/25/22........... 12,975,806 258,414
1993 Class 55-FA, AR, 5/25/08....................... 6,750,000 6,910,191
1993 Class 58-J, 5.50%, 4/25/23..................... 720,594 706,574
1993 Class 94-K, 6.75%, 5/25/23..................... 612,665 607,454
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
110
<PAGE>
PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
DESCRIPTION FACE AMOUNT VALUE
----------- ----------- ------
<S> <C> <C>
1993 Class 113-SG, IO, IF, 7/25/23................... $ 5,835,340 $ 348,276
1993 Class 139-SG, IF, 08/25/23...................... 2,597,473 2,036,105
1993 Class 152-D, PO, 8/25/23........................ 700,000 647,749
1993 Class 155-LA, 6.50%, 5/25/23.................... 1,006,619 1,003,723
1993 Class 155-SB, IO, IF, 9/25/23................... 5,742,881 334,448
1993 Class 156-SD, IF, 10/25/19...................... 1,000,000 829,192
1993 Class 156-FA, AR, 5/25/16....................... 2,538,831 2,547,151
1993 Class 174-SB, IF, 11/25/07...................... 1,394,135 1,397,999
1993 Class 187-FE, AR, 11/25/16...................... 1,180,000 1,163,025
1993 Class 207-SC, IF, 11/25/23...................... 2,300,107 1,903,164
1993 Class 209-KB, 5.659%, 8/25/08................... 3,576,000 3,439,326
1993 Class 214-L, 6.00%, 12/25/08.................... 1,212,218 1,185,501
1993 Class 220-SD, IF, 11/25/13...................... 1,242,669 1,039,703
1993 Class 223-FB, AR, 12/25/23...................... 721,333 706,327
1993 Class 223-SB, IF, 12/25/23...................... 651,339 642,576
1994 Class 12SB, IF, 01/25/09........................ 2,013,516 1,924,881
1994 Class 19-C, 5.00%, 1/25/24...................... 2,006,011 1,931,048
1994 Class 26-G, PO, 2/25/24......................... 2,199,391 1,637,662
1994 Class 30-LA, 6.50%, 2/25/09..................... 1,645,797 1,646,370
1994 Class 36-SG, IO, IF, 8/25/23.................... 3,480,275 286,726
1994 Class 39-F, AR, 3/25/24......................... 942,419 942,320
1994 Class 39-S, IF, 3/25/24......................... 362,469 350,433
1994 Class 82-SA, IO, IF, 5/25/23.................... 15,984,274 528,984
1995 Class 13-B, 6.50%, 3/25/09...................... 2,251,196 2,247,490
1996 Class 20-L, PO, 9/25/08......................... 1,655,000 1,129,764
1996 Class 24-K, PO, 2/25/08......................... 1,500,000 1,170,405
1996 Class 27-FA, AR, 3/25/17........................ 2,161,468 2,176,242
1996 Class 46-A, 5.00%, 2/25/09...................... 1,673,444 1,637,750
1996 Class 69-FA, AR, 10/18/23....................... 1,027,458 1,031,603
1997 Class 20, IO, IF, 03/25/27...................... 16,957,427 969,931
1997 Class 29PL, IO, 7.50%, 08/18/26................. 1,700,000 690,492
1997 Class 32C, PO, 10/25/21......................... 1,800,000 1,522,015
1997 Class 50FD, AR, 04/18/27........................ 1,942,228 1,943,846
1997 Class 59-FA, AR, 8/25/17........................ 4,982,155 4,997,888
1997 Class 81-PI, IO, 7.00%, 12/18/27................ 10,223,496 3,001,853
1997 Class MI, A, IF, 01/17/03....................... 2,052,784 2,073,743
1992-G Class 42-Z, 7.00%, 7/25/22.................... 729,729 731,641
1993-G Class 8-PG, 6.50%, 7/25/18.................... 1,000,000 1,000,310
1993-G Class 10-E, 5.00%, 4/25/20.................... 2,250,000 2,202,705
1993-G Class 19-K, 6.50%, 6/25/19.................... 2,802,790 2,807,751
1993-G Class 27-SE, IF, 8/25/23...................... 1,535,674 958,320
1993-G Class 13G, 6.00%, 06/25/20.................... 1,000,000 989,170
1994-G Class 13-ZB, 7.00%, 11/17/24.................. 2,728,259 2,716,958
1997-M4 Class A, AR, 3/17/04......................... 6,734,249 6,874,321
Series G-22 Class G, 6.00%, 12/25/16................. 1,447,410 1,425,947
Series X-188A, Class F, AR, 2/25/08.................. 2,487,762 2,511,744
Series X-G1C, Class C, 8.80%, 01/25/25............... 900,621 1,058,071
Series X, Class VO, IF, 12/25/22..................... 2,000,000 1,872,874
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
111
<PAGE>
PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Federal National Mortgage Assn. Pass Thru Pool:
#111366, Adjustable Rate, 8/1/19.................... $ 370,605 $ 390,235
#116612, Adjustable Rate, 3/1/19.................... 1,135,271 1,186,868
#160330, 6.345%, 3/1/99............................. 2,315,120 2,311,622
#303306, 12.50%, 1/1/16............................. 892,504 1,035,892
#303532, Adjustable Rate, 3/1/29.................... 1,982,167 1,981,888
#54844, Adjustable Rate, 09/01/27................... 1,797,368 1,797,061
Government National Mortgage Assn. Pass Thru Pool:
#297628, 8.00%, 9/15/22............................. 1,761,745 1,839,383
#313110, 7.50%, 11/15/22............................ 1,471,385 1,515,054
------------
(Cost $189,922,559) 198,986,471
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS........... 409,962,359
------------
(Cost $397,715,773)
ASSET BACKED -- 18.61%
Case Equipment Loan Trust Asset Backed Ctf. :
1994 Series C, Class A2, 8.10%, 6/15/01............. 1,093,823 1,107,135
1995 Series B, Class A3, 6.15%, 9/15/02............. 1,473,057 1,478,434
1996 Series A, Class A2, 5.50%, 2/15/03............. 4,320,719 4,307,368
Chase Manhattan Grantor Trust Automobile Loan Pass
Thru Ctfs.
Series 1995-B, Class A, 5.90%, 11/15/01............. 451,176 451,465
Chevy Chase Auto Receivable Trust Asset Backed Pass
Thru Ctf.
Series 1997-4, Class A, 6.25%, 6/20/04.............. 1,500,000 1,500,930
Collaterized Mortgage Obligation Trust CMO:
Series 12, Class D, 9.50%, 2/1/17................... 278,376 284,569
Series 16, Class Q, IF, 3/20/18..................... 176,388 191,323
Collaterized Mortgage Securities Corp. CMO:
Series 88-2 Class B, 8.80%, 4/20/19................. 354,250 370,264
CPS Auto Trust Asset Backed Pass Thru Ctf.
Series 1997-4, Class A1, 6.07%, 3/15/03............. 3,284,447 3,284,447
First USA Credit Card Master Trust Asset Backed Pass
Thru Ctf.
Series 1995-1, Class A, AR, 10/15/01................ 2,000,000 2,004,260
Ford Credit Auto Owner Trust Asset Backed Pass Thru
Ctf.
Series 1997-B, Class A2, 5.95%, 1/15/00............. 1,700,000 1,701,377
Green Tree Financial Corp. Loan Trust Asset Backed
Ctf.
Series 1993-4, Class A2, 5.85%, 1/15/19............. 3,488,458 3,490,690
Green Tree Financial Corp. Loan Trust Asset Backed
Ctf.
Series 1994-5, Class A2, 7.30%, 11/15/19............ 1,858,649 1,871,344
Merrill Lynch Home Equity Loan Asset Backed Pass Thru
Ctf.
Series 1992-1, Class A, AR, 7/15/22................. 1,126,077 1,128,768
Merrill Lynch MBS Inc. Project Pass Thru Ctf.
Series 144-S, 7.43%, 7/25/24........................ 537,032 560,393
Merrill Lynch Trust 43-E CMO, Series 43, Class E,
6.50%, 8/27/15..................................... 1,700,000 1,702,742
Morgan Stanley Mortgage Trust, CMO:
Series 35-2, HB, IF, 4/20/21........................ 2,416 396,186
Series 37-2, HB, IF, 7/20/21........................ 2,331 349,636
Series 39-3, PO, 12/20/21........................... 451,586 353,574
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
112
<PAGE>
PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
<S> <C> <C>
Navistar Financial Corp. Owner Trust Asset Backed Pass
Thru Ctf.
Series 1995, Class A2, 6.55%, 11/20/01................ $1,009,230 $1,012,379
Newcourt Receivables Trust Asset Backed Pass Thru Ctf.
Series 1997-1, Class A, 6.04%, 6/20/00................ 2,000,000 2,001,040
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1995-E, Class A4, 5.85%, 3/15/01............... 4,400,000 4,396,612
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1995-B, Class A2, 7.35%, 10/15/01.............. 778,193 787,189
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1995-C, Class A2, 6.20%, 1/15/02............... 4,304,136 4,316,059
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1996-C, Class A4, 6.80%, 03/15/02.............. 4,500,000 4,565,655
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1996-C, Class A5, 7.00%, 03/15/04.............. 2,650,000 2,715,959
Onyx Acceptance Grantor Trust CMO
5.40%, 5/15/01........................................ 2,797,951 2,781,332
Onyx Acceptance Grantor Trust Auto Loan Pass Thru Ctf.
Series 1997-1, Class A, 6.55%, 09/15/03............... 2,062,214 2,073,164
Rural Housing Trust 1987-1, Senior Mortgage Pass Thru
Ctf.
Sub Class 3-B, 7.33%, 4/1/26.......................... 379,049 386,878
Standard Credit Card Master Trust Asset Backed Ctf.
Series 1991-6, Class A, 7.875%, 1/7/00................ 1,000,000 1,015,880
Standard Credit Card Master Trust Asset Backed Ctf.
Series 1995-10, Class A, 5.90%, 2/7/01................ 2,520,000 2,516,044
Superior Wholesale Inventory Fin Trust Asset Backed
Ctf.
Series 1996-A, Class A, AR, 3/15/01................... 2,200,000 2,200,000
Toyota Auto Receivable Grantor Trust Asset Backed Ctf.
Series 1995-A, Class A, 5.85%, 3/15/01................ 293,069 292,703
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1996-A, Class A3, 6.05%, 6/01/00............... 938,318 939,575
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1997-C, Class A2, 5.95%, 6/20/00............... 4,000,000 3,996,929
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1997-B, Class A2, 6.05%, 7/20/00............... 4,997,608 5,002,169
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1997-D, Class A2, 6.20%, 12/01/10.............. 2,000,000 2,000,940
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1996-A, Class A4, 6.15%, 6/01/01............... 3,685,000 3,687,412
Western Financial Owner Trust
Series 1997-B, Class A3, 6.30%, 7/20/01............... 4,000,000 4,026,374
Western Financial Owner Trust
Series 1996-D, Class A3, 6.05%, 7/20/01............... 3,000,000 3,005,448
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1995-4, Class A1, 6.20%, 2/01/02............... 1,488,618 1,492,295
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.
Series 1996-C, Class A4, 6.80%, 12/20/03.............. 6,000,000 6,088,020
World Omni Automobile Asset Backed Ctf.
Series 1997-A, Class A4, 6.90%, 06/25/03.............. 3,000,000 3,043,110
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
113
<PAGE>
PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
World Omni Automobile LSE SEC Trust Asset Backed
Ctf.
Series 1995-A, Class A, 6.05%, 11/25/01............ $ 3,488,215 $ 3,487,098
Series 1997-B, Class A1, 6.07%, 11/25/03........... 2,500,000 2,500,000
------------
TOTAL ASSET BACKED.................................... 96,865,169
------------
(Cost $96,080,591)
CORPORATE BONDS AND NOTES -- 1.18%....................
Finance -- 1.18%
American Express Credit Corp., 8.50%, 6/15/99....... 300,000 309,888
Associates Corp. of North America:
9.125%, 4/1/00..................................... 1,675,000 1,777,475
8.15%, 8/1/09...................................... 3,625,000 4,051,445
------------
TOTAL CORPORATE BONDS AND NOTES....................... 6,138,808
------------
(Cost $6,001,863)
FOREIGN -- 1.29%
African Development Bank Note, 9.30%, 7/1/00......... 983,000 1,054,287
Metropolis of Tokyo, 8.70%, 10/5/99.................. 1,500,000 1,567,770
National Australia Bank Ltd., 9.70%, 10/15/98........ 400,000 411,096
Ontario Province of Canada Senior Unsubordinated
Debenture, 7.375%, 01/27/03......................... 3,500,000 3,679,057
------------
(Cost $6,723,067) 6,712,210
------------
TOTAL INVESTMENTS..................................... $520,624,190
============
(Cost $507,466,938)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
114
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PEGASUS INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Some of these securities are
collateralized mortgage obligations (CMOs). CMOs are debt securities issued by
U.S. government agencies or by financial institutions and other mortgage
lenders which are collateralized by a pool of mortgages held under an
indenture. Descriptions of certain collateralized mortgage obligations are as
follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these securities
are generally higher than prevailing market yields of other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped. These
securities are subject to accelerated principal paydowns as a result of
prepayments or refinancing of the underlying pool of mortgage instruments. As a
result, interest income may be reduced considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's, the owner also has a right to
receive a very small portion of principal. The high interest rate results from
taking interest payments from other classes in the REMIC Trust and allocating
them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion only
on an underlying pool of mortgage loans. The market value of these securities
is extremely volatile in response to changes in market interest rates. As
prepayments on the underlying mortgages of these securities increase, the yield
on these securities increases.
(b) Based upon estimated future cash flows, income is currently not being
recognized on certain IO, HB, and CMO securities with an aggregate market value
of $719,388. The book cost of certain IO and HB securities include a write down
in the amount of $2,239,420 taken during 1993 to properly state the net
realizable value of the securities. The write down results in a lower cost of
investments than the tax cost disclosed in Note 4 in Notes to Financial
Statements.
See Notes to Financial Statements.
Pegasus Funds
115
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ------------ --------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 1.45%
Pegasus Cash Management Fund Class I (in shares).. 17,737,340 $ 17,737,340
--------------
(Cost $17,737,340)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 82.32%
U.S. Treasury Securities -- 39.64%
Principal Strips from U.S. Treasury Securities
due:
8/15/98......................................... $ 1,500,000 1,449,495
5/15/17......................................... 10,420,000 3,257,396
8/15/17......................................... 33,315,000 10,258,022
5/15/18......................................... 15,620,000 4,589,312
11/15/18........................................ 49,840,000 14,209,384
Strips from U.S. Treasury Securities due:
5/15/98......................................... 1,800,000 1,764,594
11/15/98........................................ 1,700,000 1,620,678
2/15/99......................................... 10,805,000 10,152,162
8/15/99......................................... 9,000,000 8,221,500
8/15/00......................................... 5,000,000 4,317,150
2/15/01......................................... 2,450,000 2,055,991
2/15/11......................................... 8,025,000 3,690,216
5/15/11......................................... 9,338,000 4,231,421
2/15/12......................................... 4,555,000 1,970,083
2/15/13......................................... 10,700,000 4,342,060
5/15/13......................................... 10,594,000 4,232,727
8/15/13......................................... 3,500,000 1,377,495
2/15/14......................................... 20,400,000 7,792,800
2/15/15......................................... 2,000,000 717,920
U.S. Treasury Bonds:
10.75%, 5/15/03................................. 1,000,000 1,227,340
11.125%, 8/15/03................................ 3,500,000 4,390,295
11.625%, 11/15/04............................... 5,000,000 6,636,700
12.75%, 11/15/10................................ 111,285,000 158,841,532
10.375%, 11/15/12............................... 15,965,000 21,213,494
12.50%, 8/15/14................................. 1,300,000 2,009,514
9.875%, 11/15/15................................ 1,000,000 1,423,280
7.50%, 11/15/16................................. 5,395,000 6,296,990
8.75%, 5/15/17.................................. 9,945,000 13,038,790
7.875%, 2/15/21................................. 2,500,000 3,069,525
U.S. Treasury Notes:
3.375%, 1/15/07 Inflation Protection Series..... 3,059,670 2,979,354
8.125%, 2/15/98................................. 3,000,000 3,007,980
7.875%, 4/15/98................................. 17,605,000 17,723,305
5.00%, 1/31/99.................................. 6,450,000 6,407,688
7.00%, 4/15/99.................................. 9,600,000 9,758,976
9.125%, 5/15/99................................. 2,400,000 2,507,616
6.875%, 7/31/99................................. 7,410,000 7,541,972
7.75%, 11/30/99................................. 43,405,000 45,012,287
7.75%, 1/31/00.................................. 2,000,000 2,080,000
7.125%, 2/29/00................................. 30,300,000 31,175,973
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
116
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
6.75%, 4/30/00................................... $ 6,200,000 $ 6,341,422
6.125%, 7/31/00.................................. 4,000,000 4,041,240
8.75%, 8/15/00................................... 12,250,000 13,145,720
5.625%, 11/30/00................................. 2,200,000 2,195,864
7.50%, 11/15/01.................................. 6,800,000 7,209,088
5.75%, 8/15/03................................... 1,250,000 1,250,775
7.25%, 5/15/04................................... 9,000,000 9,712,980
6.50%, 8/15/05................................... 4,000,000 4,173,760
--------------
(Cost $459,252,432) 484,663,866
--------------
Agency Obligations -- 42.68%
Federal Home Loan Mortgage Corp. Participation
Ctfs.:
#170269, 12.00%, 8/1/15.......................... 1,198,373 1,354,017
#200070, 7.50%, 4/1/02........................... 164,545 165,412
#274081, 7.50%, 7/1/16........................... 70,023 71,648
#289711, 7.50%, 4/1/17........................... 102,945 105,314
#555238, 12.00%, 7/1/19.......................... 545,336 616,135
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 10 Class D, 10.00%, 7/15/18............... 148,326 148,598
Series 11 Class D, 9.50%, 7/15/19................ 3,000,000 3,317,154
Series 13 Class SA, IF, 4/25/23.................. 1,242,012 1,170,367
Series 22 Class C, 9.50%, 4/15/20................ 1,104,876 1,226,446
Series 23 Class E, 9.40%, 8/15/19................ 294,230 299,563
Series 23 Class F, 9.60%, 4/15/20................ 1,575,000 1,730,078
Series G-29 Class FE, AR, 4/25/24................ 4,785,469 4,802,003
Series G-29 Class SD, IO,IF, 4/25/24............. 16,437,494 542,980
Series 38 Class C, 9.50%, 1/15/19................ 79,868 80,154
Series 41 Class I, HB, 84.00%, 5/15/20........... 84,024 267,194
Series 47 Class F, 10.00%, 6/15/20............... 500,000 546,087
Series G-48 Class BE, IF, IO, 1/25/23............ 14,537,833 1,263,919
Series 99 Class Z, 9.50%, 1/15/21................ 1,342,016 1,436,055
Series 134 Class B, IO, 9.00%, 8/15/22 .......... 776,324 209,607
Series 204 Class E, HB, IF, 1/15/19.............. 21,409 504,049
Series 1045 Class G, HB, 1066.209%, 2/15/21...... 3,242 101,121
Series 1051 Class D, 7.00%, 11/15/19............. 591,460 595,843
Series 1065 Class J, 9.00%, 4/15/21.............. 2,000,000 2,153,724
Series 1072 Class A, HB, 1008.50%, 5/15/06....... 20,993 464,279
Series 1079 Class S, IF, 5/15/21................. 886,523 1,014,813
Series 1084 Class F, AR, 5/15/21................. 2,191,793 2,235,908
Series 1084 Class S, IF, 5/15/21................. 1,534,255 1,995,215
Series 1098 Class M, HB, 10.08%, 6/15/06......... 9,722 217,563
Series 1144 Class KB, 8.50%, 9/15/21............. 2,000,000 2,129,842
Series 1172 Class L, HB, 1167.776%, 11/15/21..... 15,221 460,170
Series 1196 Class B, HB, IF, 1/15/22............. 57,149 777,360
Series 1295 Class JB, 4.50%, 3/15/07............. 2,400,000 2,249,280
Series 1297 Class H, 7.50%, 1/15/20.............. 1,973,505 2,030,517
Series 1298 Class L, HB, 981.867%, 6/15/07....... 9,000 313,726
Series 1329 Class S, IO, IF, 8/15/99............. 3,349,312 136,049
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
117
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
Series 1370 Class F, 6.75%, 3/15/19.............. $ 600,000 $ 604,146
Series 1378 Class JZ, 7.50%, 11/15/21............ 3,458,066 3,609,588
Series 1389 Class SA, IF, 10/15/07............... 1,249,383 1,034,296
Series 1414 Class LA, AR, 11/15/07............... 1,872,088 1,820,677
Series 1414 Class LB, IF, 11/15/07............... 2,582,191 2,592,013
Series 1418 Class B, 6.50%, 11/15/19............. 2,250,000 2,253,983
Series 1465 Class SA, IO, IF, 2/15/08............ 15,434,950 721,630
Series 1470 Class F, AR, 5.819%, 2/15/23......... 1,814,786 1,785,343
Series 1483 Class E, 6.50%, 2/15/20.............. 3,407,500 3,411,487
Series 1483 Class FB, AR, 12/15/22............... 5,864,471 5,915,627
Series 1489 Class L, 5.50%, 4/15/08.............. 667,618 658,552
Series 1506 Class F, AR, 5/15/08................. 2,136,881 2,142,907
Series 1506 Class S, IF, 5/15/08................. 441,844 425,150
Series 1506 Class SD, IO, IF, 5/15/08............ 15,028,200 833,254
Series 1531 Class K, 6.00%, 4/15/08.............. 1,115,902 1,089,901
Series 1544 Class TA, AR, 7/15/08................ 2,246,921 2,213,044
Series 1561 Class SC, IF, 8/15/08................ 1,575,139 1,580,371
Series 1575 Class FB, AR, 8/15/08................ 2,983,452 3,092,971
Series 1575 Class SB, IF, 8/15/08................ 994,484 753,377
Series 1583 Class NS, IF, 9/15/23................ 1,386,016 1,176,800
Series 1586 Class A, 6.00%, 9/15/08.............. 1,276,443 1,267,141
Series 1587 Class FA, AR, 10/15/08............... 3,228,034 3,173,570
Series 1589 Class Z, 6.25%, 9/15/23.............. 13,549,596 12,429,790
Series 1595 Class S, IO, IF, 10/15/13............ 10,544,488 483,475
Series 1601 Class S, IF, 10/15/08................ 2,604,101 2,767,949
Series 1602 Class O, 6.00%, 10/15/23............. 2,763,000 2,688,568
Series 1603 Class IF, AR, 1/15/23................ 7,000,000 7,138,859
Series 1604 Class SE, IF, 11/15/08............... 935,165 856,347
Series 1606 Class LC, AR, 5/15/08................ 1,883,250 1,942,627
Series 1606 Class LD, IF, 5/15/08................ 424,411 358,473
Series 1612 Class SD, IF, 11/15/08............... 3,202,495 2,712,894
Series 1628 Class S, IF, 12/15/23................ 2,550,000 1,808,093
Series 1633 Class SE, IF, 12/15/23............... 1,278,652 1,410,155
Series 1635 Class O, IF, 12/15/08................ 4,462,666 4,467,873
Series 1640 Class A, 5.50%, 10/15/07............. 776,851 765,783
Series 1646 Class MB, AR, 10/15/22............... 2,571,363 2,517,596
Series 1647 Class FB, AR, 12/15/08............... 743,826 732,777
Series 1647 Class SB, IF, 12/15/08............... 2,089,118 2,065,870
Series 1655 Class F, AR, 12/15/08................ 1,494,755 1,519,350
Series 1655 Class SA, AR, 12/15/08............... 549,112 477,102
Series 1669 Class KE, AR, 5/15/23................ 3,216,841 3,237,194
Series 1681 Class K, 7.00%, 8/15/23.............. 1,353,048 1,353,979
Series 1686 Class SH, IF, 2/15/24................ 1,535,892 1,251,165
Series 1686 Class SL, IF, 2/15/24................ 1,201,836 1,114,900
Series 1689 Class SD, IF, 10/15/23............... 1,725,000 1,596,762
Series 1694 Class SE, IF, 5/15/23................ 1,254,249 1,200,858
Series 1700 Class GA, PO, 2/15/24................ 11,008,085 6,389,654
Series 1701 Class S, IF, 3/15/09................. 4,649,374 4,670,854
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
118
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
Series 1706 Class LA, 7.00%, 3/15/24............. $ 3,303,746 $ 3,323,146
Series 1716 Class F, AR, 04/15/09................ 2,524,525 2,547,884
Series 1723 Class F, AR, 05/15/24................ 4,226,107 4,197,048
Series 1796-A, Class S, IF, 2/15/09.............. 1,000,000 902,256
Series 1807 Class G, 9.00%, 1/1/06............... 1,848,188 1,965,376
Series 1825 Class C, 5.80%, 12/15/23............. 2,000,000 1,924,684
Series 1849 Class A, PO, 12/15/08................ 3,015,568 1,892,191
Series 1854 Class C, PO, 4/15/08................. 2,725,000 2,033,330
Series 1854 Class SE, IO, IF, 12/15/23........... 9,886,816 2,728,830
Series 1859 Class SB, IO, IF, 10/15/23........... 16,125,000 3,968,879
Series 1900 Class FA, AR, 3/15/09................ 10,820,440 10,874,597
Series 1900 Class I, IF, PO, 10/15/08............ 4,339,458 3,261,159
Series 1930 Class SJ, IF, IO, 7/15/16............ 13,523,002 1,321,373
Series 1933 Class SJ, IO, IF, 3/15/12............ 25,617,784 2,450,008
Series 1946 Class l, PO, 10/15/08................ 3,006,111 2,074,039
Series 1956 Class A, 7.00%, 12/20/21............. 4,448,740 4,484,094
Series 1995 Class EJ, IO, 7.00%, 10/20/17........ 6,838,142 1,403,665
Federal Housing Administration Merrill Lynch
Project Pass Thru Ctfs., 7.43%, 8/1/20........... 1,316,693 1,344,923
Federal Housing Administration Project #07335307,
7.43%, 1/1/22.................................... 1,971,286 2,033,578
Federal Housing Administration Greystone, 7.43%,
11/1/22.......................................... 2,545,256 2,624,464
Federal National Mortgage Assn. Mortgage Backed
Securities, Stripped Trust:
23, Class 2, IO, 10.00%, 9/1/17.................. 843,385 270,783
50, Class 2, IO, 10.50%, 3/25/19................. 113,568 35,465
Federal National Mortgage Assn. Pass Thru
Securities:
Pool #44699, 7.00%, 4/1/17....................... 250,147 253,709
Pool #50966, 7.00%, 1/1/24....................... 1,723,848 1,746,222
Pool #54844, Adjustable Rate, 9/1/27............. 5,192,627 5,191,739
Pool #70226, Adjustable Rate, 1/1/19............. 470,727 465,432
Pool #116612, Adjustable Rate, 3/1/19............ 1,769,686 1,850,117
Pool #160330, 6.345%, 3/1/99..................... 2,315,120 2,311,622
Pool #303306, 12.50%, 1/1/16..................... 1,352,278 1,569,534
Pool #303532, Adjustable Rate, 3/1/29............ 5,322,486 5,321,736
Federal National Mortgage Assn. Pass Thru
Securities Guaranteed Remic Trust:
1988 Class 7-Z, 9.25%, 4/25/18................... 529,558 564,720
1988 Class 17-B, 9.40%, 10/25/17................. 238,229 242,194
1989 Class 27-D, 10.00%, 1/25/16................. 120,544 121,149
1989 Class 34-E, 9.85%, 8/25/14.................. 557,574 569,192
1989 Class 70-G, 8.00%, 10/25/19................. 2,000,000 2,103,760
1989 Class 73-C, PO, 10/25/19.................... 978,455 878,957
1989 Class 78-H, 9.40%, 11/25/19................. 1,500,000 1,661,886
1990 Class 1-D, 8.80%, 1/25/20................... 2,449,148 2,620,520
1990 Class 60-K, 5.50%, 6/25/20.................. 638,367 617,127
1990 Class 63-H, 9.50%, 6/25/20.................. 900,000 985,783
1990 Class 93-G, 5.50%, 8/25/20.................. 1,285,616 1,241,879
1990 Class 94-H, HB, 505.00%, 8/25/20............ 27,485 432,669
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
119
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
1990 Class 95-J, HB, 1118.04%, 8/25/20............ $ 14,395 $ 573,107
1990 Class 102-J, 6.50%, 8/25/20.................. 3,279,318 3,251,037
1990 Class 120-H, 9.00%, 10/25/20................. 3,100,000 3,397,079
1990 Class 134-SC, IF, 11/25/20................... 762,189 864,142
1990 Class 140-K, HB, 652.145%, 12/25/20.......... 15,316 464,823
1991 Class 4-N, HB, 758.75%, 1/25/06.............. 6,182 104,590
1991 Class 7-K, HB, 908.50%, 2/25/21.............. 4,907 136,724
1991 Class 24-Z, 5.00%, 3/25/21................... 1,400,457 1,286,838
1991 Class 33-J, HB, 1008.25%, 4/25/06............ 5,925 132,166
1991 Class 144-PZ, 8.50%, 6/25/21................. 2,528,899 2,669,382
1992 Class 13-S, HB, IF, 671.398%, 1/25/99........ 19,607 98,898
1992 Class 15-Z, 7.00%, 1/25/22................... 1,878,156 1,897,631
1992-G Class 27-SQ, HB, IF, 5/25/22............... 4,956 862,325
1992 Class 35-G, HB, 1184.775%, 7/25/22........... 26,631 1,031,454
1992 Class 42-Z, 7.00%, 7/25/22................... 2,554,051 2,560,743
1992 Class 59-F, IF, 10/25/22..................... 5,244,948 5,093,730
1992 Class 61-G, IF, 10/25/22..................... 3,762,903 3,692,107
1992 Class 61-Z, 7.00%, 10/25/22.................. 1,074,567 1,047,512
1992 Class 66-JB, 5.00%, 11/25/21................. 4,500,000 3,980,219
1992 Class 85-S, IF, 6/25/99...................... 3,042,093 3,250,108
1992 Class 59-C, 6.00%, 12/25/21.................. 3,588,641 3,554,442
1992 Class 135-LC, 7.50%, 9/25/07................. 1,000,000 1,038,064
1992 Class 137-BA, 3.50%, 1/25/17................. 1,115,045 1,087,051
1992 Class 143-FI, 4/25/22........................ 4,075,065 3,908,191
1992 Class 186-M, 6.00%, 9/25/07.................. 788,154 776,056
1992 Class 199-S, IO, IF, 11/25/99................ 8,443,938 323,183
1992 Class 201-SB, IF, 10/25/22................... 500,000 500,504
1992 Class 204-B, 6.00%, 10/25/20................. 4,300,000 4,246,336
1992 Class 206-FA, AR, 6/25/18.................... 3,484,000 3,371,923
1992 Class 215-PM, 7.875%, 11/25/21............... 1,600,000 1,719,870
1993 Class 8-SB, IO, IF, 8/25/06.................. 7,577,504 341,291
1993 Class 12-S, IO, 6.25%, 2/25/23............... 5,061,658 304,428
1993 Class 12-SB, HB, IF, 2/25/23................. 40,022 330,074
1993 Class 13-G, 6.00%, 6/25/20................... 2,000,000 1,978,340
1993 Class 19-G, 5.00%, 5/25/19................... 3,265,000 3,152,864
1993 Class 19-K, 6.50%, 6/25/19................... 3,397,321 3,403,334
1993 Class 27-SE, IF, 8/25/23..................... 1,343,715 838,530
1993 Class 27-F, IF, 5/25/08...................... 2,500,000 2,435,143
1993 Class 32-K, 6.00%, 3/25/23................... 1,526,327 1,488,180
1993 Class 38-S, IO, IF, 2.755%, 11/25/22......... 13,819,062 275,207
1993 Class 44-S, IO, IF, 4/25/23.................. 8,813,109 388,931
1993 Class 55-FA, AR, 5/25/08..................... 12,000,000 12,284,785
1993 Class 58-J, 5.50%, 4/25/23................... 960,792 942,099
1993 Class 94-K, 6.75%, 5/25/23................... 918,997 911,181
1993 Class 139-SG, IF, 8/25/23.................... 3,779,324 2,962,533
1993 Class 155-LA, 6.50%, 5/25/23................. 2,642,375 2,634,772
1993 Class 156-FA, AR, 5/25/16.................... 10,578,465 10,613,130
1993 Class 107-F, AR, 6/25/08..................... 956,087 928,423
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
120
<PAGE>
PEGASUS BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
1993 Class 113-S, IO, IF, 7/25/23................ $ 6,516,552 $ 388,934
1993 Class 152-D, PO, 8/25/23.................... 1,000,000 925,355
1993 Class 155-SB, IO, IF, 9/25/23............... 13,400,056 780,379
1993 Class 156-SD, IF, 10/25/19.................. 1,250,000 1,036,490
1993 Class 174-SB, IF, 11/25/07.................. 1,510,313 1,514,498
1993 Class 175-FE, AR, 9/25/08................... 1,000,000 973,130
1993 Class 175-S, IF, 5/25/07.................... 3,470,939 3,512,597
1993 Class 186-SA, IF, 9/25/08................... 963,534 1,050,776
1993 Class 187-SA, IF, 9/25/23................... 987,304 1,030,095
1993 Class X-188A, IO, 8/25/06................... 6,134,591 359,064
1993 Class 189-SH, IF, 3/25/22................... 2,000,000 1,873,106
1993 Class 199-FA, AR, 10/25/23.................. 8,000,000 8,067,256
1993 Class 206-SD, IF, 11/25/23.................. 1,250,000 1,277,761
1993 Class 207-SC, IF, 11/25/23.................. 3,617,105 2,992,879
1993 Class 209-KB, 5.659%, 8/25/08............... 6,023,471 5,793,254
1993 Class 214-L, 6.00%, 12/25/08................ 787,942 770,576
1993 Class 220-SD, IF, 11/25/13.................. 2,087,684 1,746,700
1993 Class 221-FH, AR, 12/25/08.................. 2,000,000 2,057,430
1993 Class 223-FB, AR, 12/25/23.................. 7,114,174 6,966,177
1993 Class 223-SB, IF, 12/25/23.................. 3,081,707 3,040,249
1993 Class X-225C-VO, AR, 12/25/22............... 1,600,000 1,498,299
1993 Class XG23A-A, PO, 7/25/20.................. 6,138,916 5,658,625
1993 Class 230-FA, AR, 12/25/23.................. 5,315,193 5,349,157
1994 Class 8-G, PO, 11/25/23..................... 1,860,424 1,353,060
1994 Class 12-FB, IF, 1/25/09.................... 324,761 320,210
1994 Class 12-SB, AR, 1/25/09.................... 2,186,670 2,090,413
1994 Class 13-ZB, 7.00%, 11/17/24................ 2,728,259 2,716,958
1994 Class 19-C, 5.00%, 1/25/24.................. 2,716,138 2,614,639
1994 Class 26-G, PO, 2/25/24..................... 2,278,569 1,696,618
1994 Class 30-LA, 6.50%, 2/25/09................. 1,514,134 1,514,661
1994 Class 32-S, IF, 3/25/09..................... 2,782,166 2,812,207
1994 Class 33-FA, AR, 3/25/09.................... 2,910,683 2,847,693
1994 Class 33-F, IF, 3/25/09..................... 1,545,648 1,512,071
1994 Class 36-SG, IO, IF, 8/25/23................ 7,651,123 630,345
1994 Class 39-F, AR, 3/25/24..................... 1,256,559 1,256,427
1994 Class 39-S, IF, 3/25/24..................... 483,292 467,244
1994 Class 63-T, IF, 4/25/24..................... 799,901 716,140
1994 Class 76-FA, AR, 4/25/24.................... 3,975,811 3,950,139
1994 Class 82-SA, IO, IF, 5/25/23................ 32,427,569 1,073,158
1995 Class 13-B, 6.50%, 3/25/09.................. 3,593,255 3,587,340
1995 Class XG1C C, 8.80%, 1/25/25................ 1,597,702 1,877,019
1996 Class 7-C 6.50%, 12/25/10................... 1,000,000 978,522
1996-20, Class L, PO, 9/25/08.................... 3,165,000 2,160,546
1996 Class 24-K, PO, 2/25/08..................... 3,775,000 2,945,519
1996 Class 24-B, PO, 10/25/08.................... 3,800,000 2,329,206
1996 Class 27-FC, AR, 3/25/17.................... 2,828,802 2,848,137
1996 Class 46-A, 5.00%, 2/25/09.................. 4,685,273 4,585,336
1997 Class 20, IO, IF, 3/25/27................... 57,952,008 3,314,739
</TABLE>
See Notes to Financial Statements.
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PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ---------- --------------
<S> <C> <C>
1997 Class 20-SA, IF, 11/25/23.................... $3,054,459 $ 2,288,242
1997 Class 29-PL, IO, 7.50%, 8/18/26.............. 7,875,000 3,198,605
1997 Class 32-AP, PO, 5/25/18..................... 1,899,898 1,803,075
1997 Class 32-CP, PO, 10/25/21.................... 4,400,000 3,720,482
1997 Class 48-FB, AR, 3/25/25..................... 4,307,326 4,315,217
1997 Class 50-FD, AR, 4/18/27..................... 4,871,266 4,875,324
1997 Class 59-FA, AR, 8/25/97..................... 11,957,171 11,994,932
1997 Class 81-PI, IO, 7.00%, 11/25/97............. 24,935,355 7,321,594
1997 Class M1-B, 7.15%, 10/17/09.................. 3,750,000 3,939,825
1992-G Class 31-W, 8.00%, 9/25/21................. 2,325,662 2,440,713
1992-G Class 17G, HB, IF, 6/25/21................. 79,168 1,121,565
K-2, 2.56%, IO, 11/01/08.......................... 34,256,103 2,416,667
1997 Class F, IF, 10/15/23........................ 10,291,868 10,357,377
Government National Mortgage Assn. Pass Thru
Securities Guaranteed Remic Trust:
1994 Class 4-SA, IO, IF, 10/16/22................. 5,924,414 359,274
1996 Class 15-OB, 9.00%, 11/20/21................. 4,528,250 4,831,081
1996 Class 26-S, IO, IF, 12/16/20................. 23,719,249 1,350,977
Government National Mortgage Assn. Pass Thru Pool:
#023594, 8.50%, 7/15/08........................... 313,371 335,908
#190923, 9.00%, 12/15/16.......................... 340,834 372,947
#297628, 8.00%, 9/15/22........................... 2,642,617 2,759,075
#313110, 7.50%, 11/15/22.......................... 2,030,511 2,090,775
#345288, 7.50%, 3/15/23........................... 644,360 663,078
--------------
(Cost $497,167,426) 521,810,031
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS......... 1,006,473,897
--------------
(Cost $956,419,858)
ASSET BACKED -- 13.11%
Case Equipment Loan Trust Asset Backed Ctf.:
5.50%, 2/15/03.................................... 4,712,729 4,698,167
7.30%, 3/15/02.................................... 1,559,424 1,573,474
Chase Manhattan Grantor Trust:
Series 95-B, 5.90%, 11/15/01...................... 526,372 526,709
Series 95-A, 6.00%, 9/17/01....................... 2,691,824 2,691,824
Chase Manhattan Corp., Subordinated Note, 9.75%,
11/1/01........................................... 2,000,000 2,239,184
Chevy Chase Automobile Receivable Trust Asset
Backed Pass Thru Ctf.:
Series 1995-2, Class A, 5.80%, 6/15/02............ 707,207 706,803
Collateralized Mortgage Obligation Trust CMO:
Trust 12-D, 9.50%, 2/1/17......................... 556,752 569,138
Trust 16-Q, IF, 3/20/18........................... 312,745 339,226
CPS Auto Trust
Series 1997-4, Class-A1, 6.07%, 03/15/03.......... 8,445,721 8,445,721
Dayton Hudson Credit Card Master Trust Asset Backed
Ctf.
Series A, 6.10%, 2/25/02.......................... 1,900,000 1,904,028
First USA Credit Card Master Trust, VR, 10/15/01... 4,100,000 4,108,733
Government National Mortgage Assn. Backed Trust I
CMO, Class A,
Zero Coupon, PO, 5/20/17.......................... 204,083 165,101
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
122
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PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
Green Tree Financial Corp. Loan Trust Asset Backed
Ctf.:
Series 1995-A, Class A6, 7.30%, 7/15/25.......... $ 3,000,000 $ 3,156,801
Series 1994-5, Class A2, 7.30%, 11/15/19......... 3,308,395 3,330,992
Series 1993-4, Class A2, 5.85%, 1/15/19.......... 4,485,160 4,488,030
Merrill Lynch Trust Series 43 Class E CMO, 6.50%,
8/27/15.......................................... 4,000,000 4,006,452
Merrill Lynch Home Equity Loan, 1992-1, Class A,
Variable Rate, 7/15/22........................... 1,407,596 1,410,960
Merrill Lynch MBS 144-S, 7.43%, 7/25/24........... 4,654,278 4,856,739
Morgan Stanley Mortgage Trust CMO:
Series 35-2, HB, IF, 4/20/21..................... 3,171 519,970
Series 37-2, HB, IF, 7/20/21..................... 3,438 515,690
Series 39-3, PO, 12/20/21........................ 580,611 454,595
Navistar, Class A-2, 6.55%, 11/20/01.............. 1,297,581 1,301,630
Newcourt Receivables Asset Trust
Series 1997-1, Class-A, 6.04%, 6/20/00........... 4,250,000 4,252,210
Olympic Automobile Receivables Trust Asset Backed
Pass Thru Ctf.:
Series 1996-C, Class A5, 7.00%, 3/15/04.......... 3,500,000 3,587,115
Series 1996-C, Class A4, 6.80%, 3/15/02.......... 7,000,000 7,102,130
Series 1997-A, Class-A2, 6.125%, 8/15/00......... 3,757,384 3,765,387
ONYX Acceptance CMO Trust, 5.40%, 5/15/01......... 3,497,439 3,476,664
ONYX Accpetance Grantor Trust Auto Loan Pass Thru
Ctf.
Series 1997-1, Class A5, 6.55%, 9/15/03.......... 4,234,903 4,257,391
PaineWebber CMO Trust:
Series H-4, 8.75%, 4/1/18........................ 612,962 643,313
Series P-4, 8.50%, 8/1/19........................ 2,936,893 3,130,470
Rural Housing Trust 1987-1 Sr. Mortgage Pass Thru
Ctf.,
Class 3-B, 7.33%, 4/1/26......................... 847,175 864,673
Salomon Inc. Note, 6.70%, 12/1/98................. 2,500,000 2,515,358
Sears Credit Account Master Trust Asset Backed
Ctf.,
Series 1995-3, Class A, 7.00%, 10/15/04.......... 1,600,000 1,637,712
Standard Credit Card Master Trust Asset Backed
Ctf.,
Series 1994-2, Class A, 7.25%, 4/7/08............ 1,800,000 1,904,004
Superior Wholesale, 1996-A, Adjustable Rate,
3/15/01.......................................... 2,700,000 2,700,000
Toyota Auto Receivables Grantor Trust, Series 95-A
Class A, 5.85%, 3/15/01.......................... 293,708 293,341
Union Acceptance Corp.
Series 1997-D, Class-A3, 6.26%, 2/8/02........... 1,700,000 1,698,402
Western Financial Asset Backed Pass Thru Ctf.:
Series 1994-4, Class-A1, 7.10%, 1/1/00........... 2,929,244 2,946,731
Series 1996-A, Class-A3, 6.05%, 6/1/00........... 3,127,725 3,131,916
Series 1997-C, Class-A2, 5.95%, 6/20/00.......... 4,000,000 3,996,929
Series 1997-B, Class-A2, 6.05%, 7/20/00.......... 10,594,928 10,604,597
Series 1996-D, Class-A3, 6.05%, 7/20/01.......... 7,000,000 7,012,713
Series 1997-B, Class A3, 6.30%, 7/20/01.......... 6,000,000 6,039,562
Series 1996-C, Class A4, 6.80%, 12/20/03......... 4,150,000 4,210,881
Series 1997-D, Class-A2, 6.20%, 12/1/10.......... 13,500,000 13,506,345
World Omni Automobile LSE SEC Trust, Series 95-5
Class A, 6.05%, 11/25/01......................... 4,260,415 4,259,052
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
123
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- --------------
<S> <C> <C>
World Omni Asset Backed Pass Thru Ctf.:
Series 1997-A, Class A4, 6.90%, 6/25/03.......... $ 4,600,000 $ 4,666,102
Series 1997-B, Class-A1, 6.07%, 11/25/03......... 6,000,000 6,000,000
--------------
TOTAL ASSET BACKED.................................. 160,212,965
--------------
(Cost $157,539,721)
CORPORATE BONDS AND NOTES -- 1.71%
Finance -- .79%
ABN Amro Bank NV, 7.25%, 5/31/05.................. 2,000,000 2,104,214
Associates Corp. of North America:
9.125%, 4/1/00................................... 2,350,000 2,493,771
8.15%, 8/1/09.................................... 3,085,000 3,447,919
American Re Corp., Series B, 7.45%, 12/15/26...... 1,500,000 1,617,360
--------------
(Cost $9,234,066) 9,663,264
--------------
Industrial -- 0.84%
Boeing Co., 7.95%, 8/15/24........................ 1,730,000 2,051,330
Dayton Hudson Co., 7.875%, 6/15/23................ 1,800,000 1,912,745
General Motors Corp., 8.80%, 3/1/21............... 2,695,000 3,290,999
Monsanto Co., 8.20%, 4/15/25...................... 1,500,000 1,642,746
Nippon T&T, 9.50%, 7/27/98........................ 1,355,000 1,382,005
--------------
(Cost $9,048,931) 10,279,825
--------------
Public Utility -- 0.08%
West Texas Utilities, 6.375%, 10/1/05............. 1,000,000 1,003,653
--------------
(Cost $993,652) 1,003,653
--------------
TOTAL CORPORATE BONDS AND NOTES..................... 20,946,742
--------------
(Cost $19,276,649)
FOREIGN -- 1.41%
African Development Bank Note, 9.30%, 7/1/00....... 1,572,000 1,686,001
Kingdom of Belgium Put Euro Dollar, 9.20%, 6/28/00. 2,000,000 2,485,000
Metropolis of Tokyo, 8.70%, 10/5/99................ 2,250,000 2,351,655
National Australia Bank Ltd, 9.70%, 10/15/98....... 800,000 822,192
Province of Ontario Eurobond, 7.375%, 1/27/03...... 4,400,000 4,625,100
Province of Quebec, 9.125%, 8/22/01................ 2,515,000 2,728,775
Quebec Province of Canada, 6.50%, 1/17/06.......... 2,500,000 2,508,650
--------------
TOTAL FOREIGN....................................... 17,207,373
--------------
(Cost $16,578,213)
TOTAL INVESTMENTS................................... $1,222,578,317
==============
(Cost $1,167,551,781)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
124
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PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Some of these securities are
collateralized mortgage obligations (CMOs). CMOs are debt securities issued
by U.S. government agencies or by financial institutions and other mortgage
lenders which are collateralized by a pool of mortgages held under an
indenture. Descriptions of certain collateralized mortgage obligations are as
follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields other
mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped. These securities are subject to accelerated principal
paydowns as a result of prepayments or refinancing of the underlying pool of
mortgage instruments. As a result, interest income may be reduced
considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's the owner also has a right
to receive a very small portion of principal. The high interest rate results
from taking interest payments from other classes in the REMIC Trust and
allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion
only on an underlying pool of mortgage loans. The market value of these
securities is extremely volatile in response to changes in market interest
rates. As prepayments on the underlying mortgages of these securities
increase, the yield on these securities increases.
(b) Based upon estimated future cash flows, income is currently not being
recognized on certain IO, HB, and CMO securities with an aggregate market
value of $1,205,997. The book cost of certain IO and HB securities include a
write down in the amount of $5,725,668 taken during 1993 to properly state
the net realizable value of the securities. The write down results in a lower
cost investments than the tax cost disclosed in Note 4 in Notes to Financial
Statements.
See Notes to Financial Statements.
Pegasus Funds
125
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.34%
Pegasus Cash Management Fund Class I (in shares)..... 799,225 $ 799,225
------------
(Cost $799,225)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 64.86%
U.S. Treasury Securities -- 49.74%
Strip from U.S. Treasury Note Principal due:
9.25%, 8/15/98...................................... $ 500,000 483,165
U.S. Treasury Notes:
5.50%, 11/15/98..................................... 4,400,000 4,395,204
5.625%, 11/30/98.................................... 10,335,000 10,335,000
8.875%, 2/15/99..................................... 1,000,000 1,034,530
7.00%, 4/15/99...................................... 1,000,000 1,016,560
6.375%, 4/30/99..................................... 22,645,000 22,850,163
6.375%, 5/15/99 (Series X-1999)..................... 6,000,000 6,055,320
6.25%, 5/31/99...................................... 3,000,000 3,023,910
6.75%, 5/31/99...................................... 2,200,000 2,232,318
6.875%, 7/31/99..................................... 1,000,000 1,017,810
5.875%, 8/31/99..................................... 6,300,000 6,319,656
6.875%, 8/31/99..................................... 2,000,000 2,037,500
7.125%, 9/30/99..................................... 1,000,000 1,023,750
7.50%, 10/31/99..................................... 4,035,000 4,159,843
7.875%, 11/15/99.................................... 1,000,000 1,038,440
7.75%, 11/30/99..................................... 4,750,000 4,925,893
7.75%, 12/31/99..................................... 1,000,000 1,038,910
7.75%, 1/31/00...................................... 9,100,000 9,464,000
8.50%, 2/15/00...................................... 960,000 1,013,395
7.125%, 2/29/00..................................... 7,000,000 7,202,370
6.875%, 3/31/00..................................... 500,000 512,345
6.75%, 4/30/00...................................... 1,700,000 1,738,777
6.25%, 4/30/01...................................... 17,200,000 17,468,664
6.625%, 6/30/01..................................... 2,000,000 2,055,320
7.875%, 8/15/01..................................... 900,000 962,154
6.25%, 10/31/01..................................... 1,500,000 1,525,545
7.50%, 11/15/01..................................... 3,000,000 3,180,480
------------
(Cost $117,644,279) 118,111,022
------------
Agency Obligations -- 15.12%
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series GI98, 4.83%, 09/21/98........................ 500,000 496,015
Series 2 Class Z, 9.30%, 3/15/19.................... 883,568 939,634
Series 10 Class D, 10.00%, 7/15/18.................. 33,710 33,772
Series 11 Class C, 9.50%, 4/15/19................... 277,499 285,198
Series 26 Class F, 9.50%, 2/15/20................... 1,147,453 1,224,999
Series 81 Class A, 8.125%, 11/15/20................. 299,896 312,738
Series 85 Class C, 8.60%, 1/15/21................... 686,812 717,942
Series 99 Class Z, 9.50%, 1/15/21................... 671,008 718,027
Series 192 Class H, 9.00%, 7/15/21.................. 139,841 141,239
Series 1045 Class G, HB, 1066.208%, 2/15/21......... 162,116 50,562
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
126
<PAGE>
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Series 1096 Class D, 7.00%, 6/15/20................ $ 105,551 $ 105,545
Series 1424 Class F, IF, 11/15/22.................. 898,642 871,897
Series 1477 Class F, 6.65%, 5/15/18................ 300,000 304,050
Series 1490 Class PE, 5.75%, 7/15/06............... 250,000 249,500
Series 1497 Class CC, 5.50%, 7/15/14............... 1,000,000 998,360
Series 1541 Class E, 6.00%, 12/15/16............... 500,000 500,030
Series 1541 Class EA, 4.00%, 12/15/16.............. 1,000,000 971,020
Series 1552 Class F, 6.00%, 6/15/19................ 553,000 550,340
Series 1555 Class PK, 7.00%, 7/15/07............... 2,000,000 2,030,122
Series 1559 Class VF, 6.25%, 2/15/20............... 500,000 501,650
Series 1560 Class X, AR, 6.00%, 11/15/16........... 972,068 970,639
Series 1561 Class EA, IF, 6/15/07.................. 500,000 502,745
Series 1570 Class D, PO, 7/15/20................... 202,359 191,170
Series 1578 Class C, 5.50%, 11/15/12............... 42,963 42,920
Series 1606 Class G, 5.75%, 1/15/08................ 260,000 256,805
Series 1614 Class G, 5.80%, 2/15/19................ 1,100,000 1,095,325
Series 1669 Class C, 5.10%, 8/15/12................ 145,669 145,473
Series 1671 Class D, 5.75%, 11/15/16............... 250,000 249,790
Series 1698 Class PE, 6.00%, 11/15/05.............. 250,000 249,873
Series 1727 Class E, 6.50%, 4/15/18................ 1,000,000 1,009,050
Series 1807 Class G, 9.00%, 1/1/06................. 637,306 677,717
Federal National Mortgage Assn. Mortgage Backed
Securities
Stripped Trust 268, Class 2, IO, 9.00%, 12/25/21... 183,651 49,901
Federal National Mortgage Assn. Pass Thru
Securities:
Pool #070226, AR, 1/1/19........................... 282,436 279,259
Pool #111366, AR, 8/1/19........................... 299,334 315,190
Pool #116612, AR, 3/1/19........................... 634,416 663,249
Federal National Mortgage Assn. Pass Thru Securities
Gtd. Remic Trust:
1994-23 Class PJ, 6.00%, 1/25/02................... 250,000 249,215
1997 32C, Class GP, PO, 10/25/21................... 700,000 591,895
1997 Class A-MI, IF, 1/17/03....................... 349,410 352,977
1988 Class 7-Z, 9.25%, 4/25/18..................... 563,360 600,766
1988 Class 15-A, 9.00%, 6/25/18.................... 116,129 122,905
1988 Class 16-B, 9.50%, 6/25/18.................... 720,040 773,447
1988 Class 17-B, 9.40%, 10/25/17................... 20,701 21,046
1989 Class 27-D, 10.00%, 1/25/16................... 30,136 30,287
1989 Class 31-D, 9.15%, 8/25/18.................... 83,144 83,698
1989 Class 73-C, PO, 10/25/19...................... 159,747 143,503
1990 Class 77-C, 9.00%, 7/25/19.................... 178,009 183,068
1991 Class 41-O, 9.00%, 8/25/06.................... 375,000 383,676
1991 Class 56-K, 8.60%, 2/25/20.................... 435,462 439,071
1992 Class 13-S, HB, IF, 1/25/99................... 246,742 12,446
1992 Class 137-BA, 3.50%, 1/25/17.................. 159,292 155,293
1993 Class 93-E, 6.25%, 4/25/07.................... 175,000 175,609
1993 Class 85-PD, 5.50%, 7/25/03................... 143,202 142,795
1993 Class 86-E, 6.00%, 1/25/07.................... 1,425,000 1,423,760
1993 Class 26-PE, 5.90%, 7/25/15................... 500,000 498,645
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
127
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PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
1993 Class 107-D, 6.50%, 12/25/06.................. $ 900,000 $ 910,815
1994 Class 17-E, 6.00%, 2/25/07.................... 425,000 423,954
1994 Class 15-E, 5.50%, 2/25/19.................... 650,000 642,168
1994 Class 32-PB, 5.50%, 3/25/03................... 811,322 809,253
1994 Class 12-PD, 5.50%, 7/25/04................... 1,000,000 996,810
1995 Class PK, 6.35%, 3/15/11...................... 1,364,397 1,371,124
1997 Class 13-PA, 6.00%, 1/16/20................... 4,653,674 4,656,793
Federal National Mortgage Assn. Debenture, 4.70%,
9/10/98............................................ 1,000,000 993,346
------------
(Cost $35,653,692) 35,890,111
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS.......... 154,001,133
------------
(Cost $153,297,971)
ASSET BACKED SECURITIES -- 17.58%
Case Equipment Loan Trust Asset Backed Pass Thru
Ctf.,
Series 1994-C, Class A2, 8.10%, 6/15/01............ 403,583 408,494
Case Equipment Loan Trust Asset Backed Pass Thru
Ctf.,
Series 1995-A, Class A, 7.30%, 3/15/02............. 271,042 273,484
Chase Credit Card Trust Asset Backed Pass Thru Ctf.,
Series 1997-2, Class A, 6.30%, 4/15/03............. 1,880,000 1,896,751
Chase Manhattan Auto Owner Trust Asset Backed Pass
Thru Ctf., Series 1997-A, Class A, 6.50%, 12/17/01. 375,000 379,586
Chevy Chase Auto Receivable Trust Asset Backed Pass
Thru Ctf.,
Series 1997-3, Class A, 6.20%, 3/20/04............. 933,169 935,755
Chrysler Financial Corp., 5.625%, 1/15/99........... 900,000 897,797
Citicorp Mortgage Securities, Inc. Remic Pass Thru
Ctf.,
Series 89-16, Class A-1, AR, 4/1/19................ 217,952 214,783
Collateralized Mortgage Obligations Trust CMO, Trust
12,
Series 12, Class D, 9.50%, 2/1/17.................. 139,188 142,285
Ford Credit Auto Owner Trust Asset Backed Pass Thru
Ctf.,
Series 1996-A, Class A4, 6.75%, 9/15/00............ 607,000 613,835
Ford Credit Grantor Trust Asset Backed Ctf., Series
1994-B, Class A,
7.30%, 10/15/99.................................... 1,771,652 1,779,784
Green Tree Collateralized Mortgage Obligation,
Series 1997-3, Class A2,
6.49%, 7/15/28..................................... 3,000,000 3,006,540
Key Auto Finance Trust Asset Backed Pass Thru Ctf.,
5.85%, 3/15/03..................................... 507,813 507,900
MBNA Master Credit Card Trust Asset Backed Ctf.,
Trust 93-3,
Series 1993-3, Class-A, 5.40%, 9/15/00............. 790,000 786,066
Merrill Lynch Home Equity Loan Asset Backed Pass
Thru Ctf.,
Series 1992-1, Class A, IF, 7/15/22................ 469,198 470,320
Morgan Stanley Mortgage Trust,
CMO, Series 38-4, PO, 11/20/21..................... 72,642 56,388
Navistar Financial Corp. Owner Trust Asset Backed
Pass Thru Ctf.,
Series 1995-1, Class A2, 6.55%, 11/20/01........... 833,335 835,936
Newcourt Receivables Trust Asset Backed Pass Thru
Ctf.,
Series 1997-1, Class A, 6.04%, 6/20/00............. 1,000,000 1,000,520
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-D Class A3, 5.95%, 6/15/01............. 1,200,000 1,200,216
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
128
<PAGE>
PEGASUS SHORT BOND FUND
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PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-C Class A2, 6.30%, 01/15/00............ $ 179,973 $ 180,362
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-C Class A5, 7.00%, 03/15/04............ 1,150,000 1,178,624
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-B Class A4, 6.70%, 03/15/02............ 1,750,000 1,770,160
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-C Class A4, 6.80%, 03/15/02............ 970,702 984,864
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1996-B Class A3, 6.5%, 12/15/00............. 1,000,000 1,004,060
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1997-A Class A4, 6.625%, 12/15/02........... 670,000 678,227
Olympic Automobile Rec. Trust Asset Backed Pass Thru
Ctf.,
Series 1995-C Class A2, 6.2%, 1/15/02.............. 720,056 722,050
Ryland Acceptance Corp. Four, CMO,
Series 78, Class 78-B, 9.55%, 3/1/16............... 196,263 199,840
Sears Credit Account Master Trust Class A,
6.25%, 1/15/03..................................... 2,200,000 2,206,798
Standard Credit Card Master Trust Asset Backed Ctf.,
Series 1991-6, Class A, 7.875%, 1/07/00............ 2,725,000 2,768,273
Standard Credit Card Master Trust Asset Backed Ctf.,
Series 1993-3, Class A, 5.50%, 2/07/00............. 1,900,000 1,891,260
Standard Credit Card Master Trust Asset Backed Ctf.,
Series 1995-10, Class A, 5.90%, 2/07/01............ 450,000 449,293
Standard Credit Card Trust, Series 1991-3,
Participation Ctf.,
Class A, 8.875%, 9/7/99............................ 3,090,000 3,139,904
Western Financial Grantor Trust Asset Backed Pass
Thru Ctf.,
Series 1995-2 Class A1, 7.1%, 7/01/00.............. 1,184,962 1,194,561
Western Financial Owner Trust Asset Backed Pass Thru
Ctf.,
Series 1996-B, Class A4, 6.95%, 11/20/03........... 2,040,000 2,074,007
Western Financial Asset Backed Pass Thru Ctf.,
Series 1996-C, Class A4, 6.80%, 12/20/03........... 4,000,000 4,058,680
Western Financial Grantor Trust Auto Receivable Pass
Thru Ctf:
1993-3, Class A1, 4.60%, 4/1/99.................... 110,391 110,050
1994-3, Class A, 6.65%, 12/1/99.................... 154,155 155,011
WFS Financial Owner Trust Asset Backed Pass Thru
Ctf.,
Series 1997-D, Class A2, 6.20%, 12/1/10............ 500,000 500,235
World Omni Automobile LSE SEC Trust Asset Backed
Pass Thru Ctf.,
Series 1995-A, Class A, 6.05%, 11/25/01............ 1,065,104 1,064,763
------------
TOTAL ASSET BACKED SECURITIES......................... 41,737,462
------------
(Cost $41,502,290)
CORPORATE BONDS AND NOTES -- 17.22%
Finance -- 15.16%
Associates Corp. of North America
Put Note 9.125%, 4/1/00............................ 1,204,000 1,277,660
6.625%, 5/15/01.................................... 1,015,000 1,028,156
American Express Credit Corp
7.375%, 2/01/99.................................... 295,000 299,289
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
129
<PAGE>
PEGASUS SHORT BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
<S> <C> <C>
Association Corp of North America Medium Term Note
8.50%, 01/10/00...................................... $ 650,000 $ 678,952
7.55%, 08/23/01...................................... 250,000 260,333
Association Corp of North America
5.25%, 09/01/98...................................... 675,000 672,003
5.25%, 3/30/00....................................... 2,654,000 2,607,446
8.25%, 12/01/99...................................... 3,240,000 3,365,712
Association Corp of North America Medium Term Note
Series G,
5.49%, 01/28/99...................................... 270,000 268,438
Association Corp of North America Medium Term Note
Tranche #00455,
7.48%, 07/27/02...................................... 300,000 313,945
Association Corp of North America Senior Term Note
6.25%, 9/15/00....................................... 1,090,000 1,093,357
Beneficial Finance Corp. Medium Term Note:
7.34%, 11/26/99 (Tranche #TR00659)................... 200,000 204,022
8.90%, 7/27/98....................................... 500,000 508,058
Du Pont E I De Nemours & Co.
9.15%, 4/15/00....................................... 825,000 879,897
Ford Holdings Inc.,
9.25%, 3/1/00........................................ 4,015,000 4,273,417
Ford Motor Credit Co.:
7.25%, 5/15/99....................................... 1,675,000 1,700,170
8.00%, 01/15/99...................................... 1,170,000 1,192,053
8.875%, 06/15/99..................................... 1,460,000 1,515,477
9.50%, 4/15/00....................................... 1,015,000 1,086,008
Ford Motor Credit Co. Medium Term Note,
Tranche #00281, 7.47%, 7/29/99....................... 1,000,000 1,022,188
Tranche #00442, 7.59%, 4/6/00........................ 300,000 309,668
General Motors Acceptance Corp.
8.625%, 06/15/99..................................... 1,804,000 1,868,931
General Motors Acceptance Corp. Medium Term Note
6.04%, 3/19/99....................................... 2,000,000 1,999,002
Golden Sachs Group, Private Placement Note 144A,
6.20%, 02/15/01...................................... 1,500,000 1,490,292
Lehman Brothers Holdings Inc.,
5.75%, 02/15/98...................................... 550,000 549,773
Lehman Brothers Incorporation Senior Note
10.0%, 5/15/99....................................... 1,790,000 1,877,703
8.875%, 11/01/98..................................... 461,000 470,843
Norwest Corporation Senior Note
6.0%, 3/15/00........................................ 430,000 430,353
Union Acceptance Corp. Asset Backed Pass Thru Ctf.,
Series 1997-D, Class A3, 6.26%, 2/08/02.............. 1,750,000 1,748,355
WFS Financial Owner Trust
Series 1996-D, Class A3, 6.05%, 7/20/01.............. 1,000,000 1,001,816
-----------
(Cost $36,407,130) 35,993,317
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
130
<PAGE>
PEGASUS SHORT BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Industrial -- 1.06%
KFW International,
9.375%, 07/15/98.................................... $ 900,000 $ 918,577
Nippon Telephone & Telegraph Corp.
9.5%, 07/27/98...................................... 950,000 968,933
Texaco Capital, Corp., Guaranteed Note
9.00%, 12/15/99..................................... 600,000 633,209
------------
(Cost $1,944,134) 2,520,719
------------
Foreign -- 1.00%
National Australia Bank LTD
9.70%, 10/15/98..................................... 2,320,000 2,384,357
------------
(Cost $2,383,252)
TOTAL CORPORATE BONDS AND NOTES........................ 40,898,393
------------
(Cost $40,734,516)
TOTAL INVESTMENTS...................................... $237,436,213
============
(Cost $236,334,002)
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Some of these securities are
collateralized mortgage obligations (CMOs). CMOs are debt securities issued by
U.S. government agencies or by financial institutions and other mortgage
lenders which are collateralized by a pool of mortgages held under an
indenture. Descriptions of certain collateralized mortgage obligations are as
follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these securities
are generally higher than prevailing market yields other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped. These
securities are subject to accelerated principal paydowns as a result of
prepayments or refinancing of the underlying pool of mortgage instruments. As a
result, interest income may be reduced considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's, the owner also has a right to
receive a very small portion of principal. The high interest rate results from
taking interest payments from other classes in the REMIC Trust and allocating
them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion only
on an underlying pool of mortgage loans. The market value of these securities
is extremely volatile in response to changes in market interest rates. As
prepayments on the underlying mortgages of these securities increase, the yield
on these securities increases.
See Notes to Financial Statements.
Pegasus Funds
131
<PAGE>
PEGASUS MULTI SECTOR BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 1.00%
Pegasus Cash Management Fund Class I (in shares)...... 1,017,905 $ 1,017,905
------------
(Cost $1,017,905)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 25.38%
U.S. Treasury Securities -- 24.40%
U.S. Treasury Bonds:
12.75%, 11/15/10.................................... $6,900,000 9,848,646
8.125%, 5/15/21..................................... 5,770,000 7,271,123
U.S. Treasury Notes:
7.75%, 1/31/00...................................... 1,550,000 1,612,000
8.50%, 2/15/00...................................... 3,310,000 3,494,102
Inflation Protection Security, 3.375%, 1/15/07...... 2,651,714 2,582,107
------------
(Cost $23,521,712) 24,807,978
------------
Agency Obligations -- 0.98%
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 1552 Class HB, 6.50%, 11/15/22............... 210,000 212,171
Series 1552 Class QH, 6.00%, 8/15/23................ 335,000 326,074
Federal National Mortgage Assn. Pass Thru Securities
Guaranteed Remic Trust:
Series 1993-70 Class D, 6.90%, 12/25/03............. 260,926 265,505
Series X-225C Class PD, 5.70%, 6/25/17.............. 200,000 198,931
------------
(Cost $982,321) 1,002,681
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS........... 25,810,659
------------
(Cost $24,504,033)
ASSET BACKED SECURITIES -- 24.07%
Advanta Mortgage Loan Trust Asset Backed Ctf.,
Series 1994-3, Class A2, 7.60%, 7/25/10............. 1,459,688 1,465,833
Chemical Master Credit Card Trust 1 Asset Backed
Ctf.,
Series 1995-3, Class A, 6.23%, 8/15/02.............. 2,500,000 2,512,425
Chevy Chase Auto Receivable Trust Asset Backed Pass
Thru Ctf.,
Series 1995-2, Class A, 5.80%, 6/15/02.............. 1,060,810 1,060,206
Dayton Hudson Credit Card Master Trust Asset Backed
Ctf.,
Series 1995-1, Class A, 6.10%, 2/25/02.............. 2,500,000 2,505,300
Green Tree Financial Corp. Asset Backed Pass Thru
Ctf.,
Series 1994-B1, Class A1, 7.15%, 7/15/14............ 380,878 386,596
MBNA Master Credit Card Trust 94-C Asset Backed Pass
Thru Ctf.,
Series 1994-C, Class A, Floating Rate, 3/15/04...... 1,655,000 1,666,337
Olympic Automobile Receivables Trust Asset Backed
Pass Thru Ctf.
Series 1995-D, Class A5, 6.15%, 7/15/01............. 2,300,000 2,306,302
Series 1996-C, Class A5, 7.00%, 3/15/04............. 3,000,000 3,074,670
PNC Student Loan Trust Asset Backed Pass Thru Ctf.
Series 1997-2, Class A6, 6.572%, 1/25/04............ 200,000 205,250
Security Pacific Acceptance Corp. Asset Backed Pass
Thru Ctf.,
Series 1995-1, Class A3, 7.25%, 4/10/20............. 2,000,000 2,079,752
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
132
<PAGE>
PEGASUS MULTI SECTOR BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
DESCRIPTION AMOUNT MARKET VALUE
----------- ------ ------------
<S> <C> <C>
Standard Credit Card Trust Participation Ctfs.,
Series 1991-3, Class A, 8.875%, 9/7/99.............. $3,100,000 $ 3,150,064
Western Financial Asset Backed Pass Thru Ctf.,
Series 1996-C, Class A4, 6.80%, 12/20/03............ 4,000,000 4,058,680
------------
TOTAL ASSET BACKED SECURITIES.......................... 24,471,415
------------
(Cost $24,186,545)
CORPORATE BONDS AND NOTES -- 49.55%
Finance -- 33.66%
ABN AMRO Bank N.V., 7.25%, 5/31/05................... 4,800,000 5,050,114
American RE Corporation Debenture, 7.45%, 12/15/26... 6,000,000 6,469,440
General Electric Capital Corp., 8.85%, 4/1/05........ 3,500,000 4,028,280
Goldman Sachs Group LP, Note 144A, 6.10%, 4/15/98.... 3,000,000 2,998,578
Grand Metro Investment Corp. Put Guaranteed Note,
7.45%, 4/15/35...................................... 4,500,000 4,935,028
Mellon Financial Corp. Note, 7.625%, 11/15/99........ 2,310,000 2,374,726
Norwest Corp., Senior Medium Term Note, 7.75%,
3/1/02.............................................. 1,500,000 1,582,333
Salomon Incorporated, 6.70%, 12/1/98................. 3,700,000 3,722,729
Societe General Estate, LLC, Bond,
Series 144A, Perpetual Maturity, 7.64%, 9/30/07..... 3,055,000 3,066,918
------------
(Cost $32,778,764) 34,228,146
------------
Industrial -- 3.03%
Beckman Instruments, Debenture 7.05%, 6/1/26......... 3,000,000 3,083,799
------------
(Cost $2,990,986)
Public Utility --12.86%
Bell Telephone Co. Pennsylvania, 8.35%, 12/15/30..... 4,000,000 5,085,486
National Rural Utilities Coop Financial Corp., 6.75%,
9/1/01.............................................. 4,290,000 4,389,103
US West Capital Funding Inc., Discrete Put, 6.95%,
1/15/37............................................. 2,500,000 2,593,017
West Texas Utilities First Mortgage, 6.375%, 10/1/05. 1,000,000 1,003,653
------------
(Cost $12,360,135) 13,071,259
------------
TOTAL CORPORATE BONDS AND NOTES........................ 50,383,204
------------
(Cost $48,129,885)
TOTAL INVESTMENTS...................................... $101,683,183
============
(Cost $97,838,368)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
133
<PAGE>
PEGASUS INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 5.00%
Pegasus Cash Management Fund Class I................ $ 4,294,285 $ 4,294,285
-----------
(Cost $4,294,285)
<CAPTION>
PAR (A)
-------------
<S> <C> <C>
FOREIGN BONDS -- 92.67%
ARGENTINA -- 1.28%
Republic of Argentina, 11.375%, 01/30/17.........USD 1,000,000 1,096,875
-----------
AUSTRALIA -- 2.22%
Australia (Commonwealth), 9%, 09/15/04.............. 2,500,000 1,906,939
-----------
AUSTRIA -- 1.09%
Republic of Austria, 6%, 04/01/98................... 600,000 335,031
Republic of Austria, 7%, 01/20/03................... 7,000,000 600,632
-----------
935,663
-----------
BELGIUM -- 1.89%
Belgium Government, Series 19, 6.50%, 03/31/05...... 56,000,000 1,626,045
-----------
BRAZIL -- 3.29%
Federal Republic of Brazil, 10.125%, 05/15/27....USD 3,000,000 2,823,750
-----------
CANADA -- 5.94%
Canada Government, 10.75%, 03/15/98................. 500,000 354,443
Canada Government, 6.50%, 06/01/04.................. 3,800,000 2,800,996
Ontario Hydro 8.625% 02/06/02....................... 2,500,000 1,945,117
-----------
5,100,556
-----------
DENMARK -- 1.66%
Kingdom of Denmark, 9%, 11/15/98.................... 2,000,000 303,394
Kingdom of Denmark, 7%, 11/15/07.................... 7,000,000 1,122,297
-----------
1,425,691
-----------
FINLAND -- 2.36%
Republic of Finland, 5.50%, 02/09/01.............DEM 2,000,000 1,138,460
Republic of Finland, 6%, 01/29/02................JPY 30,000,000 275,436
Republic of Finland, 7.25%, 04/18/06................ 3,000,000 616,930
-----------
2,030,826
-----------
FRANCE -- 9.64%
Government of France, 5.75%, 03/12/01............... 10,000,000 1,721,448
Government of France, 5.50%, 04/25/04............... 20,100,000 3,434,052
Government of France, 5.50%, 05/24/07............... 12,000,000 2,024,648
Government of France, 6.50%, 04/25/11............... 6,000,000 1,089,619
-----------
8,269,767
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
134
<PAGE>
PEGASUS INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION PAR (A) MARKET VALUE
----------- ------------- ------------
<S> <C> <C>
GERMANY -- 10.81%
Deutsche Bundespost, 5.75%, 04/02/01............... 5,500,000 $ 3,159,213
Deutsche Bundespost, 7.50%, 08/02/04............... 600,000 375,742
Federal Republic of Germany, 9%, 10/20/00.......... 600,000 372,638
Federal Republic of Germany, 6.5%, 07/15/03........ 4,600,000 2,748,933
Federal Republic of Germany, 6%, 01/05/06.......... 4,500,000 2,626,606
-----------
9,283,132
-----------
INTERNATIONAL -- 10.39%
Asian Development Bank, 3.125%, 06/29/05........JPY 300,000,000 2,517,861
Asian Development Bank, 5%, 02/05/03............JPY 40,000,000 361,864
Council of Europe, 6.875%, 03/05/01.............JPY 30,000,000 273,129
European Investment Bank, 8%, 06/10/03..........GBP 1,300,000 2,253,996
Inter-American Development Bank, 2.25%,
02/05/02.......................................JPY 400,000,000 3,201,404
Inter-American Development Bank, 7.25%,
05/15/00.......................................JPY 35,000,000 309,565
-----------
8,917,819
-----------
ITALY -- 8.76%
Italian Government, 8.50%, 01/01/99................ 5,500,000,000 3,211,969
Italian Government, 9.50%, 02/01/06................ 3,500,000,000 2,478,710
Italian Government, 6.75%, 02/01/07................ 3,000,000,000 1,839,201
-----------
7,529,880
-----------
JAPAN -- 11.87%
Export-Import Bank Japan, 4.375%, 10/01/03......... 30,000,000 267,360
Export-Import Bank Japan, 2.875%, 07/28/05......... 400,000,000 3,320,615
Government of Japan, 4.50%, 12/20/04............... 40,000,000 365,848
International Bank of Reconstruction & Development,
5.25%, 03/20/02................................... 100,000,000 899,854
International Bank of Reconstruction & Development,
4.75%, 12/20/04................................... 200,000,000 1,856,430
Japan Development Bank, 6.50%, 09/20/01............ 35,000,000 322,520
Nippon Telephone & Telegraph, 2.50%, 07/25/07...... 400,000,000 3,168,717
-----------
10,201,344
-----------
NETHERLANDS -- 3.56%
Netherland Government, 5.75%, 01/15/04............. 6,000,000 3,061,818
-----------
NEW ZEALAND -- 2.11%
New Zealand Government, 8%, 04/15/04............... 3,000,000 1,814,669
-----------
RUSSIA -- 3.23%
Russia Ministry of Finance, 10%, 06/26/07.......... 3,000,000 2,778,750
-----------
SPAIN -- 3.23%
Spanish Government, 8%, 05/30/04................... 370,000,000 2,775,933
-----------
SOUTH AFRICA -- 1.22%
Republic of South Africa, 9.625%, 12/15/99......USD 1,000,000 1,048,750
-----------
SWEDEN -- 1.51%
Swedish Government, 8%, 08/15/07................... 9,000,000 1,301,333
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
135
<PAGE>
PEGASUS INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION PAR (A) MARKET VALUE
----------- --------- ------------
<S> <C> <C>
UNITED KINGDOM -- 6.61%
Exchequer 12.25% 03/26/99............................... 250,000 $ 436,417
United Kingdom Treasury, 7%, Stock 2001................. 2,000,000 3,329,883
United Kingdom Treasury, 8%, Stock 2013................. 1,000,000 1,916,380
-----------
5,682,680
-----------
TOTAL FOREIGN BONDS...................................... 79,612,220
-----------
(COST $84,413,963)
U.S. GOVERNMENT OBLIGATION -- 2.33%
United States Treasury Note, 5.75%, 09/30/99............ 2,000,000 2,003,127
-----------
(COST $1,998,422)
TOTAL INVESTMENTS........................................ $85,909,632
===========
(COST $90,706,670)
</TABLE>
(a) In local currencies unless otherwise noted.
CURRENCY ABBREVIATIONS
DEMGerman Deutschemark
GBPUnited Kingdom Pound Sterling
JPYJapanese Yen
USDUnited States Dollar
See Notes to Financial Statements.
Pegasus Funds
136
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 3.41%
Pegasus Cash Management Fund Class I (in shares)....... 1,670,219 $ 1,670,219
-----------
(Cost $1,670,219)
CORPORATE BONDS AND NOTES -- 93.52%
Aerospace & Defense -- 0.41%
United Defense Industries, Inc., Series 144A, 8.750%,
11/15/07 (a)......................................... $ 200,000 202,250
-----------
(Cost $200,000)
Automotive -- 2.20%
Collins & Aikman Products, 11.500%, 4/15/06........... 475,000 536,156
Delco-Remy International, Inc., 8.625%, 12/15/07...... 100,000 101,750
Lear Corp., 9.500%, 7/15/06........................... 300,000 331,500
Oxford Automotive, Inc., 10.125%, 6/15/07............. 100,000 106,000
-----------
(Cost $1,067,467) 1,075,406
-----------
Banking -- 1.38%
First Nationwide Holdings
9.125%, 1/15/03...................................... 375,000 393,750
10.625%, 10/1/03..................................... 250,000 280,625
-----------
(Cost $669,825) 674,375
-----------
Beverage & Tobacco -- 0.55%
Dimon, Inc., 8.875%, 6/1/06........................... 250,000 267,188
-----------
(Cost $266,307)
Broadcast Radio & TV -- 6.99%
Acme Television
Series 144A, Step Up, 0% to 9/30/00, thereafter
10.875%, 9/30/04 (a) (b)............................. 300,000 222,375
Capstar Broadcasting, 9.250%, 7/1/07.................. 150,000 154,875
Chancellor Media Corp. Los Angeles
Series B, 8.750%, 6/15/07............................ 675,000 686,813
Series 144A, 8.125%, 12/15/07 (a).................... 125,000 122,500
Fox/Liberty Networks LLC
Series 144A, 8.875%, 8/15/07 (a)..................... 125,000 125,312
Series 144A, Step Up, 0% to 8/15/02, thereafter
9.750%, 8/15/07 (a) (b)............................. 575,000 370,875
Katz Media Corp., Series B, 10.500%, 1/15/07.......... 100,000 110,500
Lamar Advertising Co., 9.625%, 12/1/06................ 200,000 216,500
Outdoor Systems, 8.875%, 6/15/07...................... 600,000 630,000
Sinclair Broadcasting Group, 9.000%, 7/15/07.......... 600,000 609,000
Young Broadcasting, Inc., Series B, 9.000%, 1/15/06... 175,000 175,875
-----------
(Cost $3,394,862) 3,424,625
-----------
Building & Development -- 1.03%
American Architectural, Series 144A, 11.750%, 12/1/07
(a).................................................. 125,000 126,563
Building Materials Corp., Series 144A, 8.000%,
10/15/07 (a)......................................... 375,000 375,937
-----------
(Cost $497,570) 502,500
-----------
Building & Equipment -- 0.59%
American Builders Contractors Supply Co., Series B,
10.625%, 5/15/07..................................... 275,000 286,688
-----------
(Cost $287,466)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
137
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Business Equipment & Services -- 1.34%
Dialog Corp. PLC, Series 144A, 11.000%, 11/15/07
(a)................................................ $ 325,000 $ 338,812
Outsourcing Solutions, Series B, 11.000%, 11/1/06... 150,000 166,875
United Stationers Supply Co., 12.750%, 5/1/05....... 134,000 153,095
-----------
(Cost $646,113) 658,782
-----------
Cable Television -- 9.83%
Cablevision Systems Corp.
9.250%, 11/1/05.................................... 450,000 479,250
7.875%, 12/15/07................................... 250,000 256,563
Charter Communications Southeast Holdings
Series B, Step Up, 0% to 3/15/01, thereafter
14.000%, 3/15/07 (b)............................... 175,000 137,375
Comcast Corp., 9.375%, 5/15/05...................... 250,000 266,875
Diamond Cable Communications PLC
Step Up, 0% to 12/15/00, thereafter 11.750%,
12/15/05 (b)...................................... 75,000 58,312
Step Up, 0% to 2/15/02, thereafter 10.750%, 2/15/07
(b)............................................... 525,000 359,625
EchoStar Satellite Broadcasting Corp.
Step Up, 0% to 3/15/00, thereafter 13.125%, 3/15/04
(b)............................................... 275,000 232,375
Frontiervision Holdings Limited Partnership
Series 144A, Step Up, 0% to 9/15/01, thereafter
11.875%, 9/15/07 (a) (b)........................... 300,000 222,000
International Cabletel, Inc.
Series B, Step Up, 0% to 2/1/01, thereafter
11.500%, 2/1/06 (b)............................... 800,000 632,000
Lenfest Communications, 8.375%, 11/1/05............. 300,000 310,500
Pegasus Communications, Series 144A, 9.625%,
10/15/05 (a)....................................... 250,000 256,250
Rogers Cablesystems LTD, Series B, 10.000%, 3/15/05. 200,000 222,000
Rogers Communications, Inc., 8.875%, 7/15/07........ 475,000 477,375
TeleWest Communication PLC
Step Up, 0% to 10/1/00, thereafter 11.000%, 10/1/07
(b)............................................... 900,000 704,250
UIH Australia/Pacific
Series B, Step Up, 0% to 5/15/01, thereafter
14.000%, 5/15/06 (b)............................... 300,000 199,500
-----------
(Cost $4,695,637) 4,814,250
-----------
Chemicals & Plastics -- 3.19%
Buckeye Cellulose Corp., 8.500%, 12/15/05........... 425,000 433,500
ISP Holdings, Inc., Series B, 9.750%, 2/15/02....... 450,000 477,562
Polymer Group, Inc., Series B, 9.000%, 7/1/07....... 500,000 502,500
Sterling Chemicals Holdings, Inc.
Step Up, 0% to 8/15/01, thereafter 13.500%, 8/15/08
(b)............................................... 250,000 151,250
-----------
(Cost $1,603,155) 1,564,812
-----------
Clothing & Textiles -- 3.61%
Collins & Aikman Floorcoverings, Series B, 10.000%,
1/15/07............................................ 100,000 105,500
Dyersburg Corp., Series B, 9.750%, 9/1/07........... 250,000 260,625
GFSI, Inc., Series B, 9.625% 3/1/07................. 200,000 206,000
Glenoit Corp., Series 144A, 11.000%, 4/15/07 (a).... 100,000 108,000
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
138
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Pillowtex Corp.
10.000%, 11/15/06.................................. $ 400,000 $ 430,000
Series 144A, 9.000%, 12/15/07 (a).................. 100,000 103,000
Westpoint Stevens, Inc., 9.375%, 12/15/05........... 525,000 553,875
-----------
(Cost $1,753,747) 1,767,000
-----------
Conglomerates -- 0.21%
Climachem, Inc., Series 144A, 10.75 %, 12/1/07 (a).. 100,000 103,500
-----------
(Cost $100,000)
Consumer Products -- 3.43%
American Safety Razor Co., Series B, 9.875%, 8/1/05. 150,000 161,250
Amscan Holdings, Inc., Series 144A, 9.875%, 12/15/07
(a)................................................ 75,000 77,063
NBTY, Inc., Series 144A, 8.625%, 9/15/07 (a)........ 350,000 351,750
Playtex Products, Series B, 8.875%, 7/15/04......... 450,000 461,250
Renaissance Cosmetics, 11.750%, 2/15/04............. 125,000 115,625
Simmons Co., 10.750%, 4/15/06....................... 350,000 371,875
Syratech Corp., 11.000%, 4/15/07.................... 150,000 140,250
-----------
(Cost $1,695,179) 1,679,063
-----------
Ecological Services & Equipment -- 1.47%
Allied Waste Industries
Series 144A, Step Up, 0% to 6/1/02, thereafter
11.300%, 6/1/07 (a) (b)............................ 825,000 583,688
Allied Waste North America, 10.250%, 12/1/06........ 125,000 137,813
-----------
(Cost $706,157) 721,501
-----------
Electronics -- 0.76%
Advanced Micro Devices, 11.000%, 8/1/03............. 100,000 107,375
Fairchild Semiconductor Corp., 10.125%, 3/15/07..... 175,000 185,938
Viasystems, Inc., 9.750%, 6/1/07.................... 75,000 77,812
-----------
(Cost $377,372) 371,125
-----------
Food & Drug Retailers -- 3.18%
Community Distributors, Series 144A, 10.250%,
10/15/04 (a)....................................... 150,000 153,750
Di Giorgio Corp., Series B, 10.000%, 6/15/07........ 300,000 296,250
Jitney-Jungle Stores of America, Inc., 10.375%,
9/15/07............................................ 200,000 210,000
Ralph's Grocery Co., 10.450%, 6/15/04............... 425,000 479,719
Stater Brothers, 9.000%, 7/1/04..................... 400,000 419,500
-----------
(Cost $1,518,994) 1,559,219
-----------
Food Products -- 2.13%
Aurora Foods, Series B, 9.875%, 2/15/07............. 225,000 238,500
Curtice-Burns Foods, Inc., 12.250%, 2/1/05.......... 150,000 166,125
International Home Foods, 10.375%, 11/1/06.......... 375,000 414,375
Van de Kamps, Inc., 12.000%, 9/15/05................ 200,000 224,000
-----------
(Cost $1,017,239) 1,043,000
-----------
Food Services -- 1.13%
Ameriserv Food Distribution, Inc., 10.125%, 7/15/07. 525,000 553,875
-----------
(Cost $544,517)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
139
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Forest Products -- 0.46%
Stone Container Corp., 9.875%, 2/1/01............... $ 225,000 $ 226,687
-----------
(Cost $230,296)
Healthcare -- 4.52%
Alliance Imaging, 9.625%, 12/15/05.................. 100,000 102,000
Dade International, Inc., Series B, 11.125%, 5/1/06. 450,000 499,500
Genesis Health Ventures
9.750%, 6/15/05.................................... 250,000 260,625
9.250%, 10/1/06.................................... 375,000 383,906
Tenet Healthcare Corp., 8.000%, 1/15/05............. 950,000 969,000
-----------
(Cost $2,230,434) 2,215,031
-----------
Home Products & Furnishings -- 1.26%
Falcon Building Products, Inc., Series B, Step Up,
0% to 6/15/02, thereafter 10.500%, 6/15/07 (b)..... 500,000 333,750
Werner Holdings Co., Inc., Series 144A, 10.000%,
11/15/07 (a)....................................... 150,000 154,875
Sealy Mattress Co., Series 144A, 9.875%, 12/15/07
(a)................................................ 125,000 128,750
-----------
(Cost $602,531) 617,375
-----------
Hotels, Motels, Inns & Casinos -- 0.76%
Capstar Hotel Company, 8.750%, 8/15/07.............. 200,000 207,500
Courtyard by Marriott, Series B, 10.750%, 2/1/08.... 150,000 164,250
-----------
(Cost $364,202) 371,750
-----------
Industrial Products & Equipment -- 3.46%
Amphenol Corp., 9.875%, 5/15/07..................... 225,000 240,750
Continental Global Group, Series B, 11.000%, 4/1/07. 375,000 401,250
Elgin National Industrial, Series 144A, 11.000%,
11/1/07 (a)........................................ 100,000 104,250
Euramax International, Inc., 11.250%, 10/1/06....... 150,000 163,125
Johnstown America Industries, Series C, 11.750%,
8/15/05............................................ 125,000 137,500
MMI Products, Inc., Series B, 11.250%, 4/15/07...... 250,000 273,750
Neenah Corp., Series B, 11.125%, 5/1/07............. 200,000 220,500
Roller Bearing Co. of America, Series 144A, 9.625%,
6/15/07 (a)........................................ 150,000 151,875
-----------
(Cost $1,672,417) 1,693,000
-----------
Leisure & Entertainment -- 4.72%
AMF Bowling Worldwide
Series B, Step Up, 0% to 3/15/01, thereafter
12.250%, 3/15/06 (b)............................... 337,000 266,651
Livent, Inc., Series 144A, 9.375%, 10/15/04 (a)..... 250,000 251,250
Premier Parks, Inc., 9.750%, 1/15/07................ 325,000 347,750
Six Flags Theme Parks
Series A, Step Up, 0% to 6/15/98, thereafter
12.250%, 6/15/05 (b)............................... 450,000 481,500
Viacom International, 8.000%, 7/7/06................ 950,000 964,250
-----------
(Cost $2,282,267) 2,311,401
-----------
Machinery & Equipment -- 1.29%
Alvey Systems, 11.375%, 1/31/03..................... 150,000 160,125
Clark Materials Handling, 10.750%, 11/15/06......... 300,000 322,500
National Equipment Services, Series 144A, 10.000%,
11/30/04 (a)....................................... 150,000 149,250
-----------
(Cost $624,026) 631,875
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
140
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Metals & Mining -- 0.78%
AEI Holding Company, Inc., Series 144A, 10.000%,
11/15/07 (a)....................................... $ 175,000 $ 181,125
Anker Coal Group, Series 144A, 9.750%, 10/1/07 (a).. 200,000 203,500
-----------
(Cost $377,871)...................................... 384,625
-----------
Oil & Gas -- 6.90%
Abraxas Petroleum Corp., Series B, 11.500%, 11/1/04. 500,000 550,000
DI Industries, Inc., 8.875%, 7/1/07................. 300,000 313,500
Dailey Petroleum Service, Series 144A, 9.750%,
8/15/07 (a)........................................ 150,000 158,250
Forcenergy, Inc., 8.500%, 2/15/07................... 500,000 505,000
Newpark Resources, Inc., Series 144A, 8.625%,
12/15/07 (a)....................................... 50,000 51,000
Pacalta Resources LTD, Series B, 10.750%, 6/15/04... 250,000 247,813
Petsec Energy, 9.500%, 6/15/07...................... 225,000 232,031
Pogo Producing Company, Series B, 8.750%, 5/15/07... 250,000 257,500
Pride Petroleum Services, Inc., 9.375%, 5/1/07...... 375,000 405,000
United Meridian Corp., 10.375%, 10/15/05............ 500,000 555,000
United Refining Co., Series 144A, 10.750%, 6/15/07
(a)................................................ 100,000 105,750
-----------
(Cost $3,357,397) 3,380,844
-----------
Printing & Publishing -- 2.58%
Garden State Newspapers, Series 144A, 8.750%,
10/1/09 (a)........................................ 550,000 554,125
Hollinger International Publishing, 9.250%, 2/1/06.. 400,000 424,000
K-III Communications Corp., Series B, 8.500%,
2/1/06............................................. 275,000 286,773
-----------
(Cost $1,244,375) 1,264,898
-----------
Retailers -- 0.64%
Leslie's Poolmart, 10.375%, 7/15/04................. 300,000 312,000
-----------
(Cost $313,315)
Services -- 1.43%
Coinmach Corp., Series 144A, Series C, 11.750%,
11/15/05 (a)....................................... 350,000 390,250
Decisionone Corp., 9.750%, 8/1/07................... 300,000 310,500
-----------
(Cost $693,825) 700,750
-----------
Steel -- 1.05%
GS Technologies, 12.250%, 10/1/05................... 225,000 252,562
Ryerson Tull, Inc., 8.500%, 7/15/01................. 250,000 260,000
-----------
(Cost $508,814) 512,562
-----------
Surface Transportation -- 4.63%
Allied Holdings, 8.625%, 10/1/07.................... 350,000 357,000
AmeriTruck Distribution, Series B, 12.250%,
11/15/05........................................... 325,000 323,375
Chemical Leaman Corp., 10.375%, 6/15/05............. 200,000 213,000
Gearbulk Holdings, 11.250%, 12/1/04................. 400,000 441,000
Statia Terminals, Series B, 11.750%, 11/15/03....... 150,000 157,500
Stena AB
10.500%, 12/15/05.................................. 275,000 300,437
8.750%, 6/15/07.................................... 250,000 253,125
Trism, Inc., 10.750%, 12/15/00...................... 225,000 221,625
-----------
(Cost $2,282,386) 2,267,062
-----------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
141
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Telecommunications & Cellular -- 13.73%
American Communications Services Step Up:
0% to 4/1/01, thereafter 12.750%, 4/1/06 (b)....... $200,000 $ 155,000
Series 144A, 13.750%, 7/15/07 (a).................. 50,000 59,750
Brooks Fiber Properties
Step Up, 0% to 11/1/01, thereafter 11.875%, 11/1/06
(b)............................................... 650,000 523,250
Call-Net Enterprises, Inc.,
Step Up, 0% to 8/15/02, thereafter 9.270%, 8/15/07
(b)............................................... 725,000 493,000
Comcast Cellular Holdings, Inc., Series B, 9.500%,
5/1/07............................................. 375,000 393,750
Esprit Telecom, 11.500%, 12/15/07................... 200,000 207,000
Hermes Europe Railtel BV, Series 144A, 11.500%,
8/15/07 (a)........................................ 150,000 167,250
Highwaymaster Communications, Inc., Series 144A,
13.750%, 9/15/05 (a)............................... 100,000 102,250
Intermedia Communications
Step Up, 0% to 7/15/02, thereafter 11.250%, 7/15/07
(b)............................................... 600,000 433,500
Series 144A, 8.875%, 11/1/07 (a)................... 100,000 103,000
McLeodUSA, Inc.
Step Up, 0% to 3/1/02, thereafter 10.500%, 3/1/07
(b)............................................... 350,000 254,625
Series 144A, 9.250%, 7/15/07 (a)................... 150,000 157,125
Metronet Communications, Unit, 12.000%, 8/15/07..... 200,000 231,500
Millicom International Cellular
Step Up, 0% to 6/1/01, thereafter 13.500%, 6/1/06
(b)............................................... 450,000 330,750
NEXTEL Communications
Step Up, 0% to 2/15/99, thereafter 9.750%, 8/15/04
(b)............................................... 250,000 223,125
Series 144A, Step Up, 0% to 9/15/02, thereafter
10.650%, 9/15/07 (a) (b).......................... 425,000 268,281
Nextlink Communications, 9.625%, 10/1/07............ 400,000 413,000
Paging Network, 10.000%, 10/15/08................... 400,000 417,000
Qwest Communications International
Series 144A, Step Up, 0% to 10/15/02, thereafter
9.470%, 10/15/07 (a) (b)........................... 700,000 476,000
RCN Corp.
Series 144A, Step Up, 0% to 10/15/02, thereafter
11.125%, 10/15/07 (a) (b)......................... 350,000 221,375
Teleport Communications
Step Up, 0% to 7/1/01, thereafter 11.125%, 7/1/07
(b)............................................... 700,000 578,375
Teligent, Inc., 11.500%, 12/1/07.................... 225,000 226,687
Telesystem International Wireless
Series 144A, Step Up, 0% to 11/1/02, thereafter
10.500%, 11/1/07 (a) (b).......................... 350,000 196,000
Series 144A, Step Up, 0% to 6/30/02, thereafter
13.250%, 6/30/07 (a) (b).......................... 150,000 94,500
-----------
(Cost $6,519,774) 6,726,093
-----------
Utilities -- 1.88%
Cal Energy Co., Inc., 9.500%, 9-15-06............... 425,000 466,438
El Paso Electric Co., First Mortgage Series E,
9.400%, 5/1/11..................................... 400,000 452,320
-----------
(Cost $904,144) 918,758
-----------
TOTAL CORPORATE BONDS AND NOTES....................... 45,803,870
-----------
(Cost $45,249,681)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
142
<PAGE>
PEGASUS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
----------- ------ ------------
<S> <C> <C>
COMMON STOCKS -- 0.02%
Cable Television -- 0.01%
Pegasus Communications, Warrant*......................... 175 $ 5,775
UIH Australia/Pacific, Warrant*.......................... 300 3,638
-----------
9,413
-----------
Telecommunications & Cellular -- 0.01%
Highwaymaster Communications, Warrant*................... 100 100
-----------
TOTAL COMMON STOCKS........................................ 9,513
-----------
(Cost $3,637)
PREFERRED STOCKS -- 3.05%
Broadcast Radio & TV -- 1.51%
American Radio Systems, PIK, Series B, 11.375%**......... 1,750 208,469
Capstar Broadcasting Partners, Inc., 12.000%............. 750 86,437
SFX Broadcasting, Inc., Cumulative, Series E, 12.625%.... 2,500 285,625
Sinclair Capital, 11.625%................................ 1,425 157,819
-----------
738,350
-----------
Cable Television -- 0.82%
Echostar Communications, Series 144A (a)................. 200 211,000
Pegasus Communications, Cumulative PIK, Series A,
12.750%**............................................... 175 189,875
-----------
400,875
-----------
Printing & Publishing -- 0.51%
Primedia, Inc., Series 144A, Series E, 9.200% (a)........ 2,500 250,625
Real Estate -- 0.21%
Crown American Realty Trust, Cumulative Senior, Series A,
11.000%................................................. 2,000 104,500
-----------
TOTAL PREFERRED STOCKS..................................... 1,494,350
-----------
(Cost $1,445,774)
TOTAL INVESTMENTS.......................................... $48,977,952
===========
(Cost $48,369,311)
</TABLE>
* Non-income producing security.
** PIK--Payment-In-Kind
(a) Security Exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
See Notes to Financial Statements.
Pegasus Funds
143
<PAGE>
PEGASUS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 100.00%
ALABAMA -- 1.41%
Courtland Industrial Development Board Solid Waste
Disposal Revenue,
Series A, 6.50%, 9/1/25............................. $ 5,000,000 $ 5,435,550
------------
ALASKA -- 0.91%
Alaska Student Loan Revenue State Assisted Series A
(AMBAC Insured), 6.125%, 7/1/05..................... 800,000 847,584
Fairbanks North Star Boro Refunding Series, (MBIA
Insured), 5.45%, 3/1/06............................. 2,500,000 2,677,775
------------
3,525,359
------------
ARIZONA -- 2.19%
Maricopa County General Obligation Unlimited Tax
School District No. 28
Series B (FGIC Insured), 6.00%, 7/1/14.............. 2,500,000 2,685,300
Salt River Project Agricultural Improvement Power
District Revenue Electric System Series D, 6.00%,
1/1/08.............................................. 625,000 706,013
Salt River Project Agricultural Refunding Series B,
5.25%, 1/1/19....................................... 5,000,000 5,034,900
------------
8,426,213
------------
CALIFORNIA -- 8.99%
Anaheim California Public Finance Authority Lease
Revenue Series C (FSA Insured), 6.00%, 9/1/16....... 2,000,000 2,266,940
California State General Obligation "A1", Unlimited
Tax, 5.00%, 10/1/23................................. 4,000,000 3,909,040
Los Angeles Uni School District General Obligation
Series A (FGIC Insured),
5.00%, 7/1/21....................................... 3,000,000 2,947,110
Northern California Public Power Agency Revenue
Refunding Geothermal
Project A (AMBAC Insured):
5.60%, 7/1/06...................................... 3,500,000 3,834,145
5.65%, 7/1/07...................................... 4,800,000 5,293,152
Orange Co. Recovery CTFS PRTN CA Series A (MBIA
Insured), 5.80%, 7/1/16............................. 5,315,000 5,711,233
Sacramento Cogeneration Authority Revenue:
7.00%, 7/1/05...................................... 1,500,000 1,723,620
6.20%, 7/1/06...................................... 2,500,000 2,758,450
Sacramento, California M.U.D. (MBIA Insured) 5.75%,
1/1/10.............................................. 3,000,000 3,247,830
Sacramento, California Municipal Utility Revenue
Refunding, Series L, 5.125%, 7/1/22................. 3,000,000 2,960,850
------------
34,652,370
------------
COLORADO -- 5.10%
Denver City & Co. Airport Revenue:
Series B, 7.25%, 11/15/05........................... 3,000,000 3,392,730
Series C, 6.50%, 11/15/06........................... 2,000,000 2,149,700
Series D, 7.75%, 11/15/13........................... 6,925,000 8,790,664
Series A, 8.50%, Prerefunded, 11/15/23.............. 220,000 250,023
Series A, 8.50%, Unrefunded, 11/15/23............... 2,280,000 2,561,785
Series A, 8.00%, Prerefunded, 11/15/25.............. 200,000 224,612
Series A, 8.00%, Unrefunded, 11/15/25............... 2,095,000 2,314,032
------------
19,683,546
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
144
<PAGE>
PEGASUS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
CONNECTICUT -- 0.93%
Connecticut Housing Finance Authority Revenue
Mortgage Subseries D-1, 5.90%, 5/15/16.............. $ 3,400,000 $ 3,577,582
------------
FLORIDA -- 10.49%
Lakeland Electric & Water Revenue Refunding Series B
(FCIC Insured), 6.00%, 10/1/11...................... 4,000,000 4,550,280
Lee County Transportation Facilities Revenue (MBIA
Insured), 5.75%, 10/1/27............................ 9,640,000 10,168,850
Florida State Board of Education Capital Outlay
General Obligation Unlimited Tax Refunding.
Series C, 5.75%, 6/1/13............................ 5,000,000 5,265,100
Series F, 5.50%, 6/1/26............................ 8,250,000 8,493,953
Series F, 6.40%, 6/1/19............................ 11,000,000 11,973,830
------------
40,452,013
------------
GEORGIA -- 9.48%
Fulton County School District General Obligation
Unlimited Tax Refunding, 6.375%, 5/1/10............. 5,000,000 5,835,600
Gainesville Water & Sewer Revenue Series B (FGIC
Insured), 6.00%, 11/15/12........................... 3,950,000 4,467,569
Georgia General Obligation Unlimited Tax:
7.10%, 9/1/09....................................... 8,500,000 10,510,080
6.75%, 9/1/11....................................... 10,000,000 12,100,100
Georgia State Housing And Finance Authority Revenue
Series B, 6.10%, 12/1/12............................ 650,000 688,122
Rockdale Country Water and Sewer Authority Revenue
(FSA Insured), 5.00%, 7/1/22........................ 3,000,000 2,950,050
------------
36,551,521
------------
HAWAII -- 1.17%
Hawaii Airport Systems Revenue Refunding Third Series
(AMBAC Insured), 5.75%, 7/1/09...................... 4,200,000 4,510,338
------------
ILLINOIS -- 10.55%
Chicago Metropolitan Water Capital Improvement,
5.50%, 12/1/12...................................... 1,000,000 1,077,240
Chicago O'Hare International Airport Revenue Series A
(AMBAC Insured):
5.625%, 1/1/13...................................... 5,000,000 5,287,950
5.625%, 1/1/14...................................... 5,000,000 5,275,800
Chicago School Reform Board of Educ. General
Obligation, (AMBAC Insured), Unlimited Tax 5.25%,
12/1/22............................................. 3,000,000 2,995,710
Cook County Community College Participation Ctfs.
District #508 Series C (MBIA) Insured), 7.70%,
12/1/04............................................. 5,000,000 6,010,200
DuPage Co. Forest Preservation District Refunding,
6.00%, 11/1/03...................................... 1,750,000 1,909,478
Illinois Health Facilities Authority Revenue
Northwestern Memorial Hospital
Series A, 5.60%, 8/15/06............................ 1,000,000 1,079,560
Illinois Health Facilities Authority Revenue
Refunding (FGIC Insured), 6.00%, 8/15/05............ 1,000,000 1,099,750
Illinois Housing Development Series A, 5.95%, 7/1/21. 2,000,000 2,065,900
Illinois State Sales Tax Revenue Refunding Series Q,
5.75%, 6/15/06...................................... 5,000,000 5,487,400
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
145
<PAGE>
PEGASUS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Northlake Illinois Public Imp. General Obligation
(MBIA Insured), 5.60%, 12/1/14...................... $ 4,000,000 $ 4,221,200
Winnebago & Boone Counties General Obligation
Unlimited Tax, 7.35%, 2/1/04........................ 3,600,000 4,187,088
------------
40,697,276
------------
INDIANA -- 1.11%
Ball State University Revenue Student Fee Series G
(FGIC Insured), 6.125%, 7/1/09...................... 400,000 431,484
Indiana State Vocational Technology Revenue Series D,
5.90%, 7/1/06....................................... 1,000,000 1,101,090
Indiana Transportation Finance Authority:
Series A, Prerefunded 6.25%, 11/1/16................ 1,370,000 1,510,713
Series A, Unrefunded 6.25%, 11/1/16................. 130,000 139,344
St. Joseph Co. Hospital Authority Facilities Revenue
Memorial Hospital South Bend Project (MBIA Insured),
6.25%, 8/15/12...................................... 1,000,000 1,088,880
------------
4,271,511
------------
MASSACHUSETTS -- 4.29%
Massachusetts State General Obligation Unlimited Tax,
Series C, 5.00%, 8/1/17............................. 10,000,000 9,864,400
Massachusetts State Housing Finance Agency Revenue
Single Family Series 47 (AMBAC Insured), 6.00%,
12/1/15............................................. 4,000,000 4,216,760
Massachusetts State Industrial Finance Agency Revenue
(MBIA Insured), 6.00%, 1/1/15....................... 2,265,000 2,477,978
------------
16,559,138
------------
MICHIGAN -- 7.08%
Caledonia Community Schools General Obligation
Unlimited Tax (MBIA Insured), 5.85%, 5/1/22......... 1,500,000 1,596,360
Grand Rapids Water Supply System Revenue (FGIC
Insured), 6.30%, 1/1/04............................. 250,000 269,215
Kalamazoo Hospital Finance Authority (MBIA Insured),
5.875%, 5/15/26..................................... 4,675,000 4,983,129
Michigan State Building Authority Revenue Series I,
6.40%, 10/1/04...................................... 600,000 654,810
Michigan State Building Authority Revenue Series II,
6.75%, 10/1/11...................................... 5,150,000 5,654,958
Michigan State Hospital Finance Authority Revenue
Detroit Medical Center, 6.50%, 8/15/18.............. 6,500,000 7,061,405
Michigan State Housing Development Authority Revenue:
Series C, 6.375%, 12/1/11........................... 1,450,000 1,548,919
Series D, 5.95%, 12/1/16............................ 5,000,000 5,249,600
Saranac Community School District, 6.00%, 5/1/13..... 250,000 271,282
------------
27,289,678
------------
MINNESOTA -- 1.71%
Minnesota State Housing Finance Agency Series D (MBIA
Insured), 5.90%, 8/1/15............................. 6,320,000 6,594,857
------------
MISSOURI -- 1.07%
Sikeston Electric Revenue Refunding (MBIA Insured),
6.00%, 6/1/05....................................... 3,710,000 4,117,172
------------
NEVADA -- 1.20%
Clark County Industrial Development Revenue Project C
Refunding (AMBAC Insured), 7.20%, 10/1/22........... 4,115,000 4,617,730
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
146
<PAGE>
PEGASUS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
NEW JERSEY -- 0.11%
Gloucester Co. Improvement Authority Gtd. Revenue,
Solid Waste Landfill Project Series AA, 6.20%,
9/1/07.............................................. $ 400,000 $ 431,096
------------
NEW MEXICO -- 0.94%
New Mexico Mortgage Finance Authority Revenue, 5.90%,
7/1/16.............................................. 3,445,000 3,609,189
------------
NEW YORK -- 3.95%
New York State Dormitory Authority Revenue, 5.875%,
7/1/08.............................................. 5,000,000 5,436,550
New York State Location Assistance Corp. Refunding
Series E, 5.00%, 4/1/21............................. 9,500,000 9,499,240
Tri-Borough Bridge & Tunnel Authority Revenue General
Purpose Series X, 6.625%, 1/1/12.................... 250,000 298,105
------------
15,233,895
------------
NORTH CAROLINA -- 2.57%
North Carolina Housing Finance Agency Single Family
Revenue:
Series BB, 6.50%, 9/1/26............................ 4,315,000 4,606,004
Series FF, 6.24%, 3/1/28............................ 5,000,000 5,284,600
------------
9,890,604
------------
OHIO -- 3.14%
Franklin Co. Hospital Revenue, Children's Hospital
Series A, 6.50%, 5/1/07............................. 950,000 1,052,211
Montgomery County Hospital Revenue Refunding (MBIA
Insured), 5.625%, 4/1/16............................ 4,500,000 4,717,530
Ohio General Obligation State of Public & Sewer
Imports Unlimited Tax, 6.00%, 8/1/07................ 1,000,000 1,111,550
Ohio Housing Financial Agency Mortgage Revenue
Residential GNMA Series A-1, 6.20%, 9/1/14.......... 1,670,000 1,787,885
Ohio State Building Authority Revenue, State
Facilities Adult Correctional Building Fund Series
A, 6.125%, 10/1/09.................................. 250,000 275,747
Ohio State Community Turnpike Revenue Series A (MBIA
Insured), 5.70%, 2/15/17............................ 3,000,000 3,175,050
------------
12,119,973
------------
PENNSYLVANIA -- 0.54%
Pennsylvania State Higher Educational Facilities
Authority Revenue (MBIA Insured), 5.625%, 5/1/14.... 2,000,000 2,095,420
------------
RHODE ISLAND -- 1.35%
Rhode Island Depositors Economic Protection Series A
(MBIA Insured), 6.30%, 8/1/05....................... 4,640,000 5,221,485
------------
SOUTH CAROLINA -- 1.87%
Greenville Hospital System Facilities Revenue SC
Health Hospital Nursing Home Improvements Series A,
5.60%, 5/1/10....................................... 2,000,000 2,115,800
Spartansburg Water Revenue (FGIC Insured), 5.00%,
6/1/17.............................................. 5,125,000 5,080,771
------------
7,196,571
------------
SOUTH DAKOTA -- 1.99%
Heartland Consumers Power District Electric Revenue
Refunding Electric Light & Power Improvements,
6.00%, 1/1/17....................................... 2,500,000 2,797,800
South Dakota Housing Development Authority Series A,
5.70%, 5/1/08....................................... 2,300,000 2,415,828
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
147
<PAGE>
PEGASUS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
South Dakota Housing Development Authority Revenue
Series C, 6.25%, 5/1/15............................. $ 1,000,000 $ 1,064,600
South Dakota State Building Authority Lease Revenue
(AMBAC Insured), 6.625%, 9/1/12..................... 1,200,000 1,378,128
------------
7,656,356
------------
TENNESSEE -- 1.52%
Knox County Health, Educational, & Housing Facilities
Revenue (MBIA Insured), 7.25%, 1/1/09............... 1,360,000 1,681,028
Memphis General Obligation Unlimited Tax, 5.25%,
7/1/13.............................................. 3,775,000 3,878,548
Metropolitan Government Nashville/Davis County
Revenue Refunding, 7.00%, 1/1/14.................... 295,000 295,496
------------
5,855,072
------------
TEXAS -- 10.02%
Matagorda County District #1 Power & Light Project
(MBIA Insured), 6.10%, 7/1/28....................... 6,750,000 7,144,875
Richardson Hospital Authority, 6.50%, 12/1/12........ 3,745,000 3,987,489
San Antonio Hotel Occupancy Tax Revenue (FGIC
Insured), 5.70%, 8/15/26............................ 10,000,000 10,537,100
Texas College Student Loan, 6.50%, 8/1/07............ 4,000,000 4,293,600
Texas General Obligation Unlimited Tax:
7.70%, 8/1/06....................................... 1,305,000 1,334,401
Series B, 5.625%, 10/1/12........................... 5,000,000 5,336,400
Texas General Obligation Refunding Series A Unlimited
Tax, 6.00%, 10/1/05................................. 1,000,000 1,114,100
Texas Turnpike Authority Dallas Northway Rev.
President George Bush Turnpike Highway Improvements
(FGIC Insured), 5.00%, 1/1/25....................... 5,000,000 4,891,250
------------
38,639,215
------------
UTAH -- 1.52%
Utah Housing Finance Agency Single Family Revenue:
Series A-2, 6.25%, 7/1/25........................... 5,545,000 5,866,055
------------
VIRGINIA -- 0.68%
Virginia State Housing Development Authority Revenue,
5.60%, 11/1/10...................................... 1,500,000 1,542,945
Virginia State Housing Development Commonwealth
Series H, 6.20%, 1/1/08............................. 1,000,000 1,060,820
------------
2,603,765
------------
WEST VIRGINIA -- 1.23%
Braxton Co. Solid Waste Disposal Revenue, 6.125%,
4/1/26.............................................. 4,475,000 4,754,330
------------
WISCONSIN -- 0.68%
Wisconsin Housing & Economic Development Authority
Revenue Series A, 6.15%, 9/1/17..................... 1,485,000 1,554,721
Wisconsin State Transportation Revenue Series B,
5.75%, 7/1/12....................................... 1,000,000 1,064,010
------------
2,618,731
WYOMING -- 0.21%
Wyoming Community Development Authority Series D,
7.60%, 6/1/17....................................... 800,000 820,504
------------
TOTAL MUNICIPAL BONDS................................. 385,574,115
------------
(Cost--$360,198,033)
TOTAL INVESTMENTS..................................... $385,574,115
============
(Cost--$360,198,033)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
148
<PAGE>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.16%
Pegasus Municipal Money Market Fund Class I (in
shares)............................................. 630,011 $ 630,011
------------
(Cost -- $630,011)
MUNICIPAL BONDS -- 99.84%
ALABAMA -- 0.97%
Courtland Industrial Development Board Solid Waste
Disposal Revenue,
Series A, 6.50%, 9/1/25............................. $ 3,500,000 3,804,885
------------
ALASKA -- 1.35%
Alaska Student Loan Revenue State Assisted Series A,
5.50%, 7/1/04....................................... 1,000,000 1,030,080
North Slope Boro General Obligation (MBIA Insured),
Capital Appreciation,
Series A Unlimited Tax, 6/30/08..................... 7,000,000 4,258,380
------------
5,288,460
------------
ARIZONA -- 0.57%
Maricopa Co. General Obligation School District No.
41 Series C (FGIC Insured), 6.10%, 7/1/14........... 2,000,000 2,208,220
------------
CALIFORNIA -- 4.89%
MSR Public Power Agency San Juan Project Revenue
Refunding Series F
(AMBAC Insured), 5.55%, 7/1/02...................... 1,615,000 1,715,792
Orange Co. Recovery CTFS PRTN CA Series A (MBIA
Insured),
5.70%, 7/1/10....................................... 4,000,000 4,369,640
Sacramento Cogeneration Authority Revenue:
5.60%, 7/1/99....................................... 3,300,000 3,376,131
5.80%, 7/1/01....................................... 1,300,000 1,364,025
5.90%, 7/1/02....................................... 1,000,000 1,063,150
University of California Revenues Refunding Multiple
Purpose (MBIA Insured), 6.20%, 9/1/01............... 6,675,000 7,189,643
------------
19,078,381
------------
COLORADO -- 10.19%
Adams Co. Single Family Mortgage Revenue Series A,
8.875%, 8/1/03...................................... 1,230,000 1,507,636
Arapahoe County Capital Improvement Revenue Refunding
Capital Appreciation, 8/31/05....................... 20,000,000 6,931,000
Colorado Water Power Development Authority Revenue
(AMBAC Insured) Revolving Fund, Series A, 6.00%,
9/1/10.............................................. 3,410,000 3,869,463
Denver City & Co. Airport Revenue:
Series D, 7.30%, 11/15/00........................... 2,900,000 3,133,972
Series C, 6.55%, 11/15/03........................... 1,145,000 1,262,397
Series B, 7.25%, 11/15/05........................... 2,000,000 2,261,820
Series A (AMT), Prerefunded, 8.00%, 11/15/25........ 360,000 409,291
Series A (AMT), Unrefunded, 8.00%, 11/15/25......... 1,000,000 1,112,890
Series A (MBIA Insured) Prerefunded, 8.50%,
11/15/07........................................... 170,000 193,052
Series A (MBIA Insured), Unrefunded, 8.50%,
11/15/07........................................... 1,830,000 2,066,235
Denver City & Co. General Obligation Refunding Water
Unlimited Tax,
7.00%, 10/1/99...................................... 8,665,000 9,120,432
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
149
<PAGE>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Jefferson Co. School District No. R-001 General
Obligation (AMBAC Insured), 5.90%, 12/15/05......... $ 3,500,000 $ 3,797,990
Poudre Valley Hospital Revenue (AMBAC Insured),
6.625%, 12/1/11..................................... 3,750,000 4,120,500
------------
39,786,678
DISTRICT OF COLUMBIA -- 0.53%
Series B-3 (MBIA Insured), 5.20%, 6/1/04............ 2,000,000 2,089,440
------------
FLORIDA -- 1.51%
Lakeland Electric & Water Revenue Series B (FGIC
Insured),
6.00%, 10/1/10..................................... 5,170,000 5,896,850
------------
HAWAII -- 3.35%
Hawaii State Airports System Revenue, Series II,
7.00%, 7/1/18...................................... 10,000,000 10,901,000
Hawaii State Department of Budget & Finance Revenue,
5.60%, 7/1/02...................................... 2,065,000 2,157,884
------------
13,058,884
------------
ILLINOIS -- 5.06%
Chicago Metropolitan Water General Obligation
Unlimited Tax Refunding, 5.00%, 12/1/02............ 4,500,000 4,672,440
Chicago O'Hare International Airport Revenue Series
A (AMBAC Insured), 5.625%, 1/1/13.................. 5,000,000 5,287,950
Metropolitan Pier & Exposition Authority Dedicated
State Tax Revenue: 6.50%, 6/1/05................... 2,960,000 3,342,018
Metropolitan Pier & Exposition Authority Dedicated
State Tax Revenue: (MBIA Insured), Capital
Appreciation, Series A, 12/15/16................... 8,330,000 3,165,483
Regional Transit Authority (AMBAC Insured), Series
A, 8.00%, 6/1/03................................... 2,785,000 3,281,454
------------
19,749,345
------------
INDIANA -- 3.81%
Indianapolis Airport Authority Revenue, 7.10%,
1/15/17............................................ 6,900,000 7,739,799
Indiana Bond Bank Revenue, 6.00%, 2/1/04............ 3,670,000 4,012,594
Indiana State Office Building Commission Revenue
Limited Tax,
6.50%, 7/1/99...................................... 3,000,000 3,106,380
------------
14,858,773
------------
KANSAS -- 1.43%
Kansas City Utility System Revenue, (FGIC Insured)
6.375%, 9/1/23..................................... 5,000,000 5,593,400
------------
MARYLAND -- 4.03%
Maryland State Community Development Administration
Department Revenue Fifth Series, 5.95%, 4/1/16..... 3,000,000 3,174,300
Maryland State General Obligation Unlimited Tax
5.00%, 3/1/08...................................... 5,510,000 5,751,779
Maryland State Public Improvement General Obligation
Second Series, 5.25%, 6/15/02...................... 2,500,000 2,621,350
Montgomery County Public Improvement Series A,
5.20%, 10/1/01..................................... 4,000,000 4,172,440
------------
15,719,869
------------
MASSACHUSETTS -- 3.96%
Massachusetts General Obligation, (FGIC Insured),
Refunding Series A,
5.00%, 8/1/07....................................... 2,500,000 2,616,175
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
150
<PAGE>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
Massachusetts General Obligation Unlimited Tax:
Series B, 9.25%, 7/1/00............................. $ 2,000,000 $ 2,245,180
Series A, 6.25%, 7/1/02............................. 4,500,000 4,884,300
New England Educational Loan Refunding Senior A:
6.50%, 9/1/02....................................... 5,250,000 5,727,487
------------
15,473,142
------------
MICHIGAN -- 7.05%
Michigan State Building Authority Revenue Refunding
Series I, 6.75%, 10/1/11............................ 5,575,000 6,121,629
Michigan State Hospital Financing Authority Revenue
Refunding:
Detroit Medical Center Obligation Group A 6.25%,
8/15/13............................................ 6,750,000 7,233,367
Royal Oak Hospital Financing Authority Revenue
Refunding:
Wm. Beaumont Hospital,
6.25%, 1/1/11....................................... 5,445,000 6,276,288
6.25%, 1/1/12....................................... 6,850,000 7,899,626
------------
27,530,910
------------
MINNESOTA -- 5.04%
Minnesota Housing Finance Agency Revenue:
Series D, 5.90%, 8/1/15............................. 2,360,000 2,462,636
Series G, 6.25%, 7/1/26............................. 3,475,000 3,659,766
Series L, 6.25%, 7/1/27............................. 12,910,000 13,534,069
------------
19,656,471
------------
NEVADA -- 3.03%
Clark County General Obligation Limited Tax, 7.00%,
9/1/00.............................................. 6,705,000 7,212,032
Las Vegas General Obligation Refunding Limited Tax,
6.40%, 10/1/03...................................... 2,250,000 2,472,818
Nevada General Obligation Limited Tax:
Series C, 5.90%, 4/1/01............................. 1,000,000 1,057,300
Series A, 6.00%, 5/1/02............................. 1,000,000 1,067,210
------------
11,809,360
------------
NEW JERSEY -- 1.90%
New Jersey State Transit Fund Authority, 5.00%,
6/15/04............................................. 7,090,000 7,375,514
------------
NEW YORK -- 11.16%
New York City General Obligation Unlimited Tax
Refunding Series I,
5.75%, 3/15/07...................................... 6,500,000 6,944,665
New York City General Obligation Unlimited Tax Series
A, 6.00%, 8/1/06.................................... 5,000,000 5,428,800
New York City Municipal Water Authority Series C,
(FGIC Insured),
7.00%, 6/15/16...................................... 3,805,000 4,213,162
New York State Dormitory Authority Revenue Series A,
5.20%, 5/15/05...................................... 4,300,000 4,448,651
New York State Environment Pollution Control
Facilities,
6.50%, 6/15/14...................................... 260,000 283,020
6.50%, 6/15/14...................................... 6,740,000 7,375,515
New York State Location Assistance Corp. Series B,
7.50%, 4/1/20....................................... 4,255,000 4,775,642
Tri-Borough Bridge & Tunnel Authority Revenue General
Purpose Series Y, 5.90%, 1/1/08..................... 9,000,000 10,086,570
------------
43,556,025
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
151
<PAGE>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
NORTH CAROLINA -- 1.44%
North Carolina University and College Improvements
Unlimited Tax General Obligation, 5.00%, 6/1/01.... $ 2,535,000 $ 2,622,255
North Carolina Municipal Power Agency (MBIA
Insured), 7.25%, 1/1/07............................ 2,500,000 3,009,350
------------
5,631,605
------------
OHIO -- 1.07%
Ohio State Highway Capital Improvements General
Obligation Unlimited Tax, Series B, 5.00%, 5/1/05.. 4,000,000 4,183,760
------------
PENNSYLVANIA -- 6.11%
Geisinger Authority Health System Revenue Series A,
5.50%, 7/1/03...................................... 2,895,000 3,052,691
Pennsylvania Intergovernmental Coop Authority
Special Tax Revenue
(FGIC Insured): 6.00%, 6/15/00..................... 7,000,000 7,324,030
Philadelphia Gas Works Revenue Fourteenth Series
(CAPMAC Insured), 7.00%, 7/1/02.................... 12,090,000 13,491,231
------------
23,867,952
------------
SOUTH CAROLINA -- 2.05%
Beaufort County School District General Obligation
Unlimited Tax Series B
(MBIA Insured), 4.75%, 3/1/03...................... 2,800,000 2,873,332
South Carolina State Public Service Authority
Revenue Refunding Series A, 5.00%, 7/1/01.......... 5,000,000 5,148,650
------------
8,021,982
------------
TENNESSEE -- 2.25%
Hamilton County General Obligation Unlimited Tax
Series A,
5.00%, 5/1/09...................................... 3,370,000 3,495,971
Memphis-Shelby County Airport Authority Revenue
Refunding,
6.75%, 9/1/12...................................... 2,000,000 2,202,760
Tennesse State General Obligation Refunding Series
B, 5.00%, 5/1/00................................... 3,000,000 3,075,270
------------
8,774,001
------------
TEXAS -- 4.20%
Dallas Independent School District General
Obligation Unlimited Tax,
8.70%, 8/1/00...................................... 1,000,000 1,113,950
Harris County Revenue, (AMBAC Insured), Capital
Appreciation, 8/15/18.............................. 7,500,000 2,322,600
Humble Independent School District General
Obligation Unlimited Tax Refunding, 6.00%, 2/15/04. 2,035,000 2,199,021
Texas A&M University Permanent Fund Revenue, 5.60%,
7/1/05............................................. 5,000,000 5,414,600
Texas State General Obligation Unlimited Tax
Refunding Series B,
5.625%, 10/1/11.................................... 5,000,000 5,358,650
------------
16,408,821
------------
VIRGINIA -- 1.41%
Virginia Beach General Obligation Unlimited Tax
Series A, 6.85%, 5/1/99............................ 1,100,000 1,132,890
Loudoun County Sanitation Authority Water and Sewer
Refunding,
(FGIC Insured), 6.25%, 1/1/16...................... 4,000,000 4,368,720
------------
5,501,610
------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
152
<PAGE>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION FACE AMOUNT MARKET VALUE
----------- ----------- ------------
<S> <C> <C>
WASHINGTON -- 4.13%
Seattle General Obligation Limited Tax Series A,
5.75%, 1/15/17....................................... $10,000,000 $ 10,457,600
Snohomish County Mukilteo Refunding General
Obligation, (FGIC Insured), 5.70%, 12/1/12.......... 5,140,000 5,651,636
------------
16,109,236
------------
WISCONSIN -- 7.35%
Durand Hospital Facilities Revenue, Chippewa Valley
Hospital and Nursing Project, 7.10%, 9/1/12......... 5,735,000 6,835,718
Southeast Professional Revenue, (MBIA Insured),
Capital Appreciation
12/15/07............................................ 5,000,000 3,185,500
12/15/09............................................ 5,000,000 2,855,800
Wisconsin Clean Water Revenue Series 2, 6.00%,
6/1/07............................................... 2,500,000 2,801,475
Wisconsin General Obligation Unlimited Tax Series B:
7.00%, 5/1/02....................................... 4,155,000 4,631,620
7.00%, 5/1/03....................................... 4,625,000 5,245,490
Wisconsin State Health & Educational Facilities
Authority Revenue:
(MBIA Insured), 5.10%, 8/15/05...................... 3,000,000 3,119,820
------------
28,675,423
------------
TOTAL MUNICIPAL BONDS................................. 389,708,997
------------
(Cost -- $370,929,391)
TOTAL INVESTMENTS..................................... $390,339,008
============
(Cost -- $371,559,402)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
153
<PAGE>
PEGASUS MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 4.41%
Pegasus Michigan Tax-Exempt Money Market Fund Class I
(in shares)........................................... 3,541,071 $3,541,071
-----------
(Cost -- $3,541,071)
MUNICIPAL BONDS -- 95.59%
MICHIGAN -- 89.83%
Allegan Public School District General Obligation
(AMBAC Insured), Unlimited Tax, 5.75%, 5/1/12........ $ 200,000 211,622
Dearborn Economic Division Oakwood Obligation Group
Series, 5.60%, 11/15/08.............................. 1,690,000 1,828,360
Dearborn School District, General Obligation,
Unlimited Tax, 6.00%, 5/1/14......................... 1,000,000 1,068,910
Dearborn Sewage Disposal Series A (MBIA Insured),
5.125%, 4/1/14....................................... 1,830,000 1,844,915
Detroit Local Development Fin. Authority Series A,
5.375%, 05/1/18...................................... 3,850,000 3,887,153
Detroit Local Development Fin. Authority Series A,
5.375%, 05/1/21...................................... 1,410,000 1,423,607
Detroit Sewer Disposal Revenue (FGIC Insured), 6.00%,
7/1/00............................................... 1,225,000 1,282,587
Detroit Wayne Co. (FGIC Insured), Public Improvements,
5.50%, 2/1/17........................................ 1,800,000 1,864,926
Dexter Community Schools General Obligation Unlimited
Tax, 5.80%, 5/1/19................................... 2,000,000 2,109,620
Dickinson Co. Economic Development Corporation
Pollution Control Revenue, 5.85%, 10/1/18............ 3,000,000 3,120,600
Eastern Michigan University General Sinking Fund,
6.375%, 6/1/14....................................... 1,000,000 1,083,350
Ferndale School District General Obligation (FGIC
Insured), Unlimited Tax, 5.50%, 5/1/11............... 1,000,000 1,052,240
Huron Valley School District (FGIC Insured), Unlimited
Tax, 5.875%, 5/1/16.................................. 1,000,000 1,075,200
Jackson Co. Hospital Finance Authority, 5.25%,
06/1/23.............................................. 3,000,000 2,983,200
Kalamazoo Economic Development, Friendship Vlg-A:
6.125%, 5/15/12...................................... 1,250,000 1,321,050
6.125%, 5/15/17...................................... 600,000 635,514
Kalamazoo Hospital Finance Authority Revenue (FGIC
Insured), 5.25%, 6/1/17.............................. 1,000,000 998,750
Lake Orion Community School District (AMBAC Insured),
5.80%, 05/1/15....................................... 1,000,000 1,066,040
Lansing Building Authority (AMBAC Insured), 6.00%,
6/1/05............................................... 1,000,000 1,105,000
Livingston Co. General Obligation, Bldg. Authority,
Limited Tax, 5.80%, 7/1/08........................... 1,330,000 1,465,115
Marysville Public School District General Obligation,
Unlimited Tax, 5.60%, 5/1/09......................... 620,000 659,426
Michigan General Obligation, Environmental Protection
Program, 6.25%, 11/1/08.............................. 450,000 496,845
Michigan Higher Education Student Loan (AMBAC
Insured), 5.75%, 6/1/13.............................. 1,000,000 1,060,690
Michigan Municipal Bond Authority Revenue Series A,
5.70%, 8/1/07........................................ 1,145,000 1,222,539
Michigan Municipal Bond Authority Revenue Series A
(FGIG Insured), 6.00%, 12/1/13....................... 1,500,000 1,633,845
Michigan State Hospital Finance Authority Revenue
(AMBAC Insured), 6.00%, 9/1/11....................... 1,250,000 1,338,513
Michigan State Hospital Finance Authority Revenue:
Mercy Mt. Clemens, 6.25%, 5/15/11.................... 500,000 531,135
Daughters of Charity, 5.25%, 11/1/15................. 1,000,000 1,005,270
Mercy Health Services, 5.375%, 8/15/16............... 1,000,000 1,017,190
Mercy Health Services, 5.625%, 8/15/16............... 2,000,000 2,079,520
Detroit Medical Center, 6.50%, 8/15/18............... 2,000,000 2,172,740
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
154
<PAGE>
PEGASUS MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
<S> <C> <C>
Michigan State Housing Development Authority Revenue:
6.375%, 12/1/11...................................... $ 750,000 $ 801,165
6.00%, 12/1/15....................................... 4,750,000 4,978,380
Michigan State University Revenue, 6.25%, 8/15/15..... 2,000,000 2,153,820
Newaygo Public Schools General Obligation, Unlimited
Tax, 6.00%, 5/1/12................................... 300,000 322,833
Norway Vulcan Area Schools, 5.75%, 5/1/13............. 250,000 265,788
Novi Community Schools, 6.125%, 5/1/13................ 750,000 828,982
Oak Park School District (AMBAC Insured), 6.00%,
6/1/09............................................... 250,000 270,222
Ottawa Co. General Obligation, Water Supply System,
6.00%, 8/1/08........................................ 1,950,000 2,100,852
Perry Public Schools General Obligation, Unlimited
Tax, 6.00%, 5/1/12................................... 250,000 270,663
Rockford Public Schools, 5.875%, 5/1/12............... 500,000 532,965
Rockford Public Schools General Obligation (FGIC
Insured), Unlimited Tax, 5.25%, 5/1/22............... 2,930,000 2,936,211
Romulus MI Community General Obligation, 05/1/18...... 4,755,000 1,687,597
Royal Oak Hospital Finance Authority Revenue-William
Beaumont Hospital-G, 5.60%, 11/15/11................. 2,000,000 2,103,740
Saranac Community School District, 6.00%, 5/1/13...... 250,000 271,283
Traverse City Area Public School District, Series I,
5.70%, 5/1/12........................................ 2,400,000 2,564,784
University of Michigan Revenue, 6.20%, 12/1/03........ 1,000,000 1,087,050
University of Michigan Revenue, 5.75%, 12/1/12........ 850,000 894,455
University of Michigan University Revenues, 5.50%,
12/1/21.............................................. 450,000 455,913
Wayne State University (AMBAC Insured):
5.50%, 11/15/07...................................... 1,000,000 1,061,940
5.65%, 11/15/15...................................... 800,000 832,472
Wayne Westland Community Schools (FGIC Insured),
Unlimited Tax, 5.75%, 5/1/11......................... 350,000 370,338
Western University Revenue (FGIC Insured), 6.25%,
11/15/12............................................. 250,000 276,648
Wyoming Public School, 5.875%, 5/1/13................. 350,000 373,439
-----------
72,087,012
-----------
PUERTO RICO -- 5.76%
Puerto Rico Commonwealth General Obligation (MBIA
Insured) Unlimited Tax, Public Improvements, 6.25%,
7/1/12................................................ 1,000,000 1,158,200
Puerto Rico Commonwealth General Obligation, 5.75%,
7/1/17................................................ 3,280,000 3,463,778
-----------
4,621,978
-----------
TOTAL MUNICIPAL BONDS.................................. 76,708,990
-----------
(Cost -- $72,539,658)
TOTAL INVESTMENTS....................................... $80,250,061
===========
(Cost -- $76,080,729)
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
155
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND COMMENCEMENT OF OPERATIONS
The Pegasus Funds (Pegasus or the Funds), was organized as a Massachusetts
business trust on April 21, 1987, and registered under the Investment Company
Act of 1940 (the "Act"), as amended, as an open-end investment company. As of
December 31, 1997, the Trust consisted of twenty-nine seperate portfolios of
which there were twenty asset allocation, equity, bond and municipal bond
funds, as described below.
<TABLE>
<CAPTION>
COMMENCEMENT
DATE
------------
<S> <C>
ASSET ALLOCATION
FUNDS
Managed Assets Con-
servative Fund 1/23/86
Managed Assets Bal-
anced Fund 1/1/94
Managed Assets
Growth Fund 12/17/96
EQUITY FUNDS
Equity Income Fund 1/27/95
Growth Fund 1/27/95
Mid-Cap Opportunity
Fund 6/1/91
Small-Cap Opportu-
nity Fund 1/27/95
Intrinsic Value
Fund 6/1/91
Growth and Value
Fund 6/1/91
Equity Index Fund 7/10/92
International Eq-
uity Fund 12/3/94
BOND FUNDS
Intermediate Bond
Fund 6/1/91
Bond Fund 6/1/91
Short Bond Fund 9/17/94
Multi Sector Bond
Fund * 3/5/93
International Bond
Fund 1/27/95
High Yield Bond
Fund 6/30/97
MUNICIPAL BOND
FUNDS
Municipal Bond Fund 3/1/88
Intermediate Munic-
ipal Bond Fund 3/1/88
Michigan Municipal
Bond Fund 2/1/93
</TABLE>
*On December 31, 1997 the Pegasus Income Fund's name changed to the Pegasus
Multi Sector Bond Fund.
During the period August 23, 1996 through September 23, 1996, various
portfolios of Pegasus and the Prairie Funds reorganized pursuant to an
Agreement and Plan of Reorganization (the "Plan"). Shareholders of each
reorganizing portfolio approved the Plan as required which called for the
transfer of the assets, subject to the liabilities, of each Prairie portfolio
to the corresponding Pegasus Fund. The Plan also called for the issuance of
shares by each Pegasus Fund to the shareholders of the corresponding Prairie
Fund, such shares being equal in value to the net assets so transferred.
In accordance with generally accepted accounting principles, the historical
cost of investment securities was carried forward to the surviving fund (the
Prairie Fund or Pegasus Fund which is the accounting survivor for performance
measurement purposes as noted in the table that follows) and the results of
operations for pre-combination periods for the surviving fund were not
restated. The financial statements do not reflect the expenses of the
reorganization. The combination of the funds was treated as a tax free business
combination and accordingly was accounted for by a method of accounting for tax
free mergers of investment companies (sometimes referred to as the pooling
without restatement method).
Pegasus Funds
156
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
The following table sets forth the date on which such reorganizations
occurred and the name of the surviving fund (for the number of shares issued in
connection with the various mergers and net assets transferred, see Note 6):
<TABLE>
<CAPTION>
FORMER CURRENT
WOODWARD FORMER PRAIRIE PEGASUS DATE OF MERGER/
FUND FUND FUND NAME CHANGE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-- * Managed Assets Income Managed Assets Conservative September 21, 1996
* Balanced Managed Assets Managed Assets Balanced August 26, 1996
-- * Equity Income Equity Income September 21, 1996
Capital Growth * Growth Growth August 26, 1996
* Opportunity -- Mid-Cap Opportunity September 23, 1996
-- * Special Opportunities Small-Cap Opportunity September 21, 1996
* Intrinsic Value -- Intrinsic Value September 23, 1996
* Growth and Value -- Growth and Value September 23, 1996
* Equity Index -- Equity Index September 23, 1996
* International Equity International Equity International Equity August 26, 1996
* Intermediate Bond -- Intermediate Bond September 23, 1996
*Bond Bond Bond August 26, 1996
* Short Bond -- Short Bond September 23, 1996
-- * Intermediate Bond Multi Sector Bond Fund September 21, 1996 / December 31, 1997
-- * International Bond International Bond September 21, 1996
Municipal Bond * Municipal Bond Municipal Bond September 14, 1996
-- * Intermediate Municipal Bond Intermediate Municipal Bond September 21, 1996
* Michigan Municipal
Bond -- Michigan Municipal Bond September 23, 1996
</TABLE>
* Surviving fund for accounting and performance measurement purposes.
On the date of reorganization, unrealized appreciation (depreciation)
transferred from the non-surviving funds amounted to $1,342,149, $43,749,490,
$3,808,550, $(796,831), and $1,597,784 for the Prairie Managed Assets, Woodward
Capital Growth, Prairie International Equity, Prairie Bond, and Woodward
Municipal Bond Funds, respectively. The Woodward Municipal Bond Fund also had a
capital loss of $1,078,301 which was transferred into the surviving fund on the
reorganization date.
The number of shares redeemed in connection with the reorganization totaled
877,085, 16,316,879, 13,340,453, 13,043,015 and 9,810,385 for the Prairie
Managed Assets, Woodward Capital Growth, Prairie International Equity, Prairie
Bond and Woodward Municipal Bond Funds, respectively.
On December 12, 1997, the First National Bank of Chicago International Equity
Common Trust Fund transferred cash and securities to the Pegasus International
Equity Fund in exchange for 2,159,636 Class I shares. On the date of the
reorganization unrealized appreciation transferred from the non-surviving fund
amounted to $5,338,342.
The combination of the funds was treated as a tax free business combination
and accordingly was accounted for by a method of accounting for tax free
mergers of investment companies (sometimes referred to as the pooling without
restatement method).
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
Pegasus in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies. Following generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liablilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments
The Funds value investment securities at market value which is determined by
a pricing service based upon quoted market prices or dealer quotes at the close
of the respective domestic and foreign securities exchanges.
Pegasus Funds
157
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Securities for which market prices or dealer quotes are not readily available
(including restricted securities) are valued by the investment advisor, First
Chicago NBD Investment Management Company (FCNIMCO), in accordance with
procedures approved by the Board of Trustees. Fixed income securities (other
than fixed income municipal securities) are valued at the closing bid price as
estimated by an independent pricing service. Fixed income municipal securities
for which quoted bid and ask prices are readily available are valued at the
mean between the quoted bid prices (as obtained by the pricing service from
dealers in such securities) and ask prices (as calculated by the pricing
service based upon its evaluation of the market for such securities). Fixed
income securities with maturities less than 60 days are carried at amortized
cost, which approximates market value. Shares of open-end management investment
companies (mutual funds) in which the Funds invest are valued at their
respective net asset values as determined under the Act. Such mutual funds
value securities in their portfolios for which market quotations are readily
available at their current market value (generally the last reported sale
price) and all other securities and assets at fair value pursuant to methods
established in good faith by the Board of Trustees of the underlying mutual
fund. Money market funds in which the funds also invest generally value
securities in their portfolios on an amortized cost basis, which approximates
market value.
Investment security purchases and sales are recorded as of the trade date.
Pegasus invests in securities subject to repurchase agreements. Such
transactions are entered into only with
institutions included on the Federal Reserve System's list of institutions with
whom the Federal Reserve Open Market Desk will do business. FCNIMCO, acting
under the supervision of the Board of Trustees, has established the following
additional policies and procedures relating to Pegasus' investments in
securities subject to repurchase agreements: 1) the value of the underlying
collateral is required to equal or exceed 102% of the funds advanced under the
repurchase agreement including accrued interest; 2) collateral is marked to
market daily by FCNIMCO to assure its value remains at least equal to 102% of
the repurchase agreement amount; and 3) funds are not disbursed by Pegasus or
its agent unless collateral is presented or acknowledged by the collateral
custodian.
Restricted Securities
The High Yield Bond Fund is permitted to invest in securities that are
subject to legal or contractual restrictions on resale. These securities
generally may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities in the High Yield Bond Fund amounted to $8,735,031 or 18% of the
Fund's net assets.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount on debt instruments. Bond
premiums and discounts are amortized/accreted under the effective interest rate
method as required by the Internal Revenue Code (the Code) and generally
accepted accounting principles. For mortgage-backed securities, as prepayments
on the underlying mortgages increase or decrease the expected life, the yield
is adjusted to amortize/accrete the security to its new expected life.
Dividends are recorded on the ex-dividend date.
The High Yield Bond Fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures, under the general
supervision of the Board of Trustees of the Fund. A debt obligation is removed
from non-accrual status when the issuer resumes interest payments or when
collectibility of interest is reasonably assured. None of the Fund's debt
obligations were in non-accrual status at December 31, 1997 or for the period
then ended.
For the International Equity Fund, dividends are recorded on the ex-dividend
date or upon receipt of ex-dividend notification in the case of certain foreign
securities. For the International Equity Fund and the International Bond Fund,
investment income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
Pegasus Funds
158
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Forward Foreign Currency Contracts
The International Equity Fund and the International Bond Fund may enter into
forward foreign currency contracts which is an agreement between two parties to
buy and sell a currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is "marked-to-market" daily using the prevailing exchange rate and the
change in market value is recorded as an unrealized gain or loss. When the
contract is closed, a realized gain or loss is recorded equal to the difference
between the value of the contract at the time it was entered into and the value
at the time it was closed.
The International Equity Fund and the International Bond Fund may enter into
forward foreign currency contracts with the objective of minimizing its risk
from adverse changes in the relationship between currencies or to enhance
income. The International Equity Fund and the International Bond Fund may also
enter into a forward contract in a foreign currency in order to "lock in" the
U.S. dollar price of a security or the U.S. dollar equivalent of such dividend
or interest payments.
These contracts involve market risk in excess of the amounts reflected in the
International Equity Fund's and the International Bond Fund's Statement of
Assets and Liabilities. The face or contract amount in U.S. dollars, as
reflected in notes to the Portfolio of Investments, reflects the total exposure
the Fund has in that particular currency contract. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does not
perform under the contract.
Futures contracts
The Funds may enter into futures contracts for the purpose of hedging against
changes in the value of their portfolio securities or in securities they intend
to purchase. The Equity Funds may also enter into stock index futures contracts
as a substitute for comparable market positions in the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin". Subsequent payments
("variation margin") are made or received by the Fund each day, depending on
the daily fluctuation of the value of the contract. Futures contracts are
valued based upon their quoted daily closing prices. The aggregate principal
amounts of the contracts are not recorded in the financial statements. The
daily change in the value of the contract is recorded as an unrealized gain or
loss. Futures contracts open at December 31, 1997 and their related unrealized
market appreciation (depreciation) are set forth in the notes to the Portfolio
of Investments.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments or indices, which may not
correlate with the change in value of the hedged investments.
Foreign Currency Translations
The accounting records of the International Equity Fund and the International
Bond Fund are maintained in U.S. dollars. Foreign currency-denominated assets
and liabilities are "marked-to-market" daily using the prevailing exchange rate
and the change in value is recorded as an unrealized gain or loss. Upon receipt
or payment, a realized gain or loss is recorded equal to the difference between
the original value and the settlement value of the asset or liability.
Purchases and sales of securities, income, and expenses are translated into
U.S. dollars at prevailing exchange rates on the respective dates of the
transactions.
In both the International Equity Fund and the International Bond Fund, net
realized gains and losses on foreign currency transactions represent gains and
losses from sales and maturities of forward foreign currency contracts,
disposition of foreign currencies, currency gains and losses realized between
trade and settlement dates on securities transactions and between the ex, pay
and settlement dates on dividend income. In the International Bond Fund, the
effects of changes in foreign currency exchange rates on investments in
securities are included within the net realized foreign exchange gain or loss
on securities sold and net unrealized foreign exchange gain or loss on
investment securities held. In the International Equity Fund, exchange rate
fluctuations on investments are not segregated in the statement of operations
from changes arising in market price
Pegasus Funds
159
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
movements but are instead included within the net realized gain or loss on
securities sold and net unrealized gain or loss on investment securities held.
Federal Income Taxes
It is Pegasus' policy to comply with the requirements of Subchapter M of the
Code, as amended, applicable to regulated investment companies and to
distribute net investment income and realized gains to its shareholders.
Therefore, no federal income tax provision is required in the accompanying
financial statements.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to differing treatments for
foreign currency transactions, passive foreign investment companies,
redemptions in-kind, wash sales and post-October 31 capital losses. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the net investment income or realized
gains were recorded by the Fund. Certain book-to-tax timing differences for the
Funds are reflected as excess distributions in the Statements of Changes in Net
Assets. These distributions do not constitute a tax return of capital.
During the year ended December 31, 1997, the Mid-Cap Opportunity, Intrinsic
Value and Equity Index Funds made redemptions in-kind to shareholders which
resulted in GAAP-basis realized gains of approximately $2 million, $2 million
and $115 million, respectively. For tax purposes these realized gains were
distributed only to the redeeming shareholders with the transfer of specific
fund assets. These transactions resulted in permanent book-tax differences that
were reclassified to paid-in capital in the respective funds.
As of December 31, 1997, the following Pegasus Funds had capital loss
carryforwards and related expiration dates as follows:
<TABLE>
<CAPTION>
FUND 2002 2003 2004 2005 TOTAL
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bond $15,197,602 $1,041,792 $ -- $ -- $16,239,394
Intermediate
Bond 3,896,190 2,190,497 168,406 -- 6,255,093
Municipal
Bond -- -- 307,645 -- 307,645
Michigan Mu-
nicipal Bond 29,400 -- 94,571 144,655 268,626
International
Equity -- 97,147 1,083,369 6,436,160 7,616,676
</TABLE>
Shareholder Dividends
Dividends from net investment income are declared and paid quarterly by the
Equity Funds (with the exception of the Managed Assets Conservative and Equity
Income Funds which pay dividends monthly) and monthly by the Bond Funds. Net
realized capital gains are distributed annually. Distributions from net
investment income and net realized gains are made during each year to avoid the
4% excise tax imposed on regulated investment companies by the Code. However,
to the extent that net realized capital gains of a Fund can be reduced by
capital loss carryforwards, if any, such gains will not be distributed.
Deferred Organization Costs
Organization costs are amortized on a straight-line basis over the five year
period beginning with the commencement of operations of each portfolio.
Concentration of Risk
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investing in U.S. companies and U.S. government securities. These risks include
revaluation of currencies, adverse fluctuations in foreign currency values and
possible adverse political, social and economic developments, including those
particular to a specific industry, country or region, which could cause the
securities and their markets to be less liquid and price more volatile than
those of comparable U.S. companies and U.S. government securities.
While the International Equity Fund has a diversified investment portfolio,
it currently has investments in excess of 10% in Banks (15.26%).
Pegasus Funds
160
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Although the Intermediate Municipal Bond Fund has a diversified investment
portfolio, it currently has investments in excess of 10% of its total
investments in the States of Colorado and New York. Although the Municipal Bond
Fund has a diversified investment portfolio it currently has investments in
excess of 10% in each of the States of Florida, Illinois and Texas. The
Michigan Municipal Bond Fund does not have a diversified portfolio since 94% of
its investments are within the State of Michigan. Such concentrations within a
particular state may subject the funds more significantly to economic changes
occurring within those states.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations; expenses which are applicable to all Funds are allocated among them
on the basis of relative average daily net assets. Fund expenses directly
attributable to a class of shares are charged to that class; expenses which are
applicable to all classes are allocated among them.
Pegasus monitors the rate at which expenses are charged to ensure that a
proper amount of expense is charged to income each year. This percentage is
subject to revision if there is a change in the estimate of the future net
assets of Pegasus or a change in expectations as to the level of actual
expenses.
When Issued/To Be Announced (TBA) Securities
The Bond Funds may purchase securities on a "when issued" basis. These
securities have been registered by a municipality or government agency, but
have not yet been issued to the public. These transactions involve a commitment
by the Funds to purchase particular securities, with payment and delivery
taking place at a future date, for which all specific information, such as the
face amount and maturity date of such investment security, is not known at the
time of the trade. These transactions are subject to market fluctuations and
the risk that the value at delivery may be more or less than the purchase price
at which the transactions were entered. The current value of these securities
is determined in the same manner as that of other portfolio securities.
Although the Bond Funds generally purchase these securities with the intention
of acquisition, such securities may be sold before the settlement date.
Multiple Classes of Capital Shares of Beneficial Interest
The Funds offer Class A, Class B and Class I shares. Each class of shares has
equal rights as to earnings, assets and voting privileges except that each
class bears different distribution and shareholder service expenses. Each class
of shares has exclusive voting rights with respect to matters that affect just
that class. Income, expenses (other than expenses attributable to a specific
class) and realized and unrealized gains or losses on investments are allocated
to each class of shares based on relative net assets. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses. Class B shares automatically convert to Class A shares
at the beginning of the eighth year (the third year in the case of the Short
Bond Fund and the seventh year in the case of the Equity Index, Multi Sector
Bond, Intermediate Bond and Intermediate Municipal Bond Funds) after the date
of purchase.
(3) INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
FCNIMCO is the investment advisor pursuant to the Advisory Agreement whereby
FCNIMCO has agreed to provide the day-to-day management of each of the Fund's
investments. For its advisory services to Pegasus, FCNIMCO is entitled to a
fee, computed daily and payable monthly.
The Trust has a Co-Administration Agreement with NBD Bank, FCNIMCO and BISYS
Fund Services (collectively, the "Co-Administrators") pursuant to which the Co-
Administrators have agreed to assist in all aspects of the Funds' operations
for an administration fee, at an annual rate of 0.15% of each Fund's average
daily net assets.
Federated Investment Counseling (Federated) is the sub-advisor of the High
Yield Bond Fund's investments. For its services, Federated is entitled to a
monthly fee at the following annual rates, which vary according to the level of
assets: 0.50% on the first $30 million of average daily net assets, 0.40% on
the next $20
Pegasus Funds
161
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
million, 0.30% on the next $25 million, 0.25% on the next $25 million and 0.20%
of the Fund's average daily net assets in excess of $100 million. The Sub-
Adviser's fee is paid by FCNIMCO and not by the Fund.
BISYS serves as the Fund's principal underwriter and distributor of the
Funds' shares.
NBD Bank, an affiliate of FCNIMCO, is also compensated for its services as
Pegasus' custodian and for certain transfer agent services and is reimbursed
for certain out of pocket expenses incurred on behalf of Pegasus.
Pegasus maintains an unfunded, nonqualified deferred compensation plan. This
plan allows for an individual trustee to elect to defer receipt of all or a
percentage of fees which otherwise would be payable for services performed.
The Funds may invest in mutual funds sponsored and managed by FCNIMCO,
subject to certain limitations. The terms of such transactions are identical to
those of non-related entities except that, to avoid duplicate fees, the FCNIMCO
remits to each Fund an amount equal to all fees assessed on the assets invested
in such funds, with the exception of the Managed Assets Conservative, Managed
Assets Balanced and Managed Assets Growth funds whereby FCNIMCO only reimburses
the investment management and administration fees.
(4) INVESTMENT SECURITIES TRANSACTIONS
The following summarizes the securities transactions entered into by the
Funds, excluding short-term investments, for the period ended December 31,
1997:
<TABLE>
<CAPTION>
FEDERAL TAX
PURCHASES SALES COST
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Managed Assets Conservative........... $ 40,341,598 $ 59,254,596 $ 112,247,490
Managed Assets Balanced............... 168,533,083 676,816 249,037,958
Managed Assets Growth................. 11,045,897 1,637,915 13,040,656
Equity Income......................... 121,797,611 183,282,803 258,050,039
Growth................................ 137,116,808 194,641,315 411,832,684
Mid-Cap Opportunity................... 374,106,956 328,208,028 710,899,972
Small-Cap Opportunity................. 162,850,376 103,262,342 194,340,334
Intrinsic Value....................... 321,863,258 177,337,465 505,182,618
Growth and Value...................... 317,644,482 281,270,106 746,269,806
Equity Index.......................... 112,828,659 357,629,195 515,031,297
International Equity.................. 102,472,916 15,328,261 462,593,667
Intermediate Bond..................... 197,878,347 120,072,503 509,673,358
Bond.................................. 395,565,675 134,533,596 1,173,876,259
Short Bond............................ 192,723,312 128,229,945 236,334,002
Multi Sector Bond..................... 52,960,229 147,896,739 97,838,368
International Bond.................... 39,575,181 3,043,125 90,706,670
High Yield Bond....................... 49,657,409 3,227,772 48,378,807
Municipal Bond........................ 132,441,301 119,758,013 360,198,033
Intermediate Municipal Bond........... 141,560,019 145,399,341 371,559,402
Michigan Municipal Bond............... 40,537,180 24,862,664 76,080,729
</TABLE>
Pegasus Funds
162
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
At December 31, 1997, accumulated net unrealized appreciation (depreciation)
on investments based on Federal Tax cost was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Managed Assets Conservative........... $ 3,618,681 $(1,380,733) $ 2,237,948
Managed Assets Balanced............... 8,428,869 (3,649,136) 4,779,733
Managed Assets Growth................. 249,678 (271,595) (21,917)
Equity Income......................... 63,465,878 (2,483,521) 60,982,357
Growth................................ 257,532,339 (26,573,715) 230,958,624
Mid-Cap Opportunity................... 352,836,966 (13,984,328) 338,852,638
Small Cap Opportunity................. 54,405,730 (7,079,366) 47,326,364
Intrinsic Value....................... 125,136,591 (5,063,566) 120,073,025
Growth and Value...................... 331,688,541 (15,732,599) 315,955,942
Equity Index.......................... 331,678,222 (12,346,330) 319,331,892
International Equity*................. 114,013,139 (62,037,595) 51,975,544
Intermediate Bond..................... 15,912,994 (4,962,162) 10,950,832
Bond.................................. 58,303,134 (14,339,522) 14,418,474
Short Bond............................ 1,207,358 (105,147) 1,102,211
Multi Sector Bond..................... 3,857,601 (12,786) 3,844,815
International Bond*................... 814,024 (5,611,062) (4,797,038)
High Yield Bond....................... 829,479 (230,334) 599,145
Municipal Bond........................ 25,383,385 (7,303) 25,376,082
Intermediate Municipal Bond........... 18,779,606 -- 18,779,606
Michigan Municipal Bond............... 4,169,332 -- 4,169,332
</TABLE>
*For the International Equity and International Bond Funds, the gross
unrealized appreciation and depreciation is inclusive of foreign exchange gain
and loss on foreign equity and bond holdings.
(5) EXPENSES
For the year ended December 31, 1997 FCNIMCO voluntarily agreed to reimburse a
portion of the operating expenses of the Funds to the extent that the Funds'
expenses exceeded the following amounts (as a percentage of each Fund's average
net assets). Under the terms of the Investment Advisory Agreement, the
Investment Adviser is entitled to a monthly fee as a percentage of each Fund's
daily net assets. Each Fund's current contractual fee for advisory services is
also set forth below.
<TABLE>
<CAPTION>
CURRENT
CONTRACTUAL
ADVISORY
CLASS A CLASS B CLASS I FEE RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Managed Assets Conservative................. 1.25% 2.00% 1.00% 0.65%
Managed Assets Balanced..................... 1.25% 2.00% 1.00% 0.65%
Managed Assets Growth....................... 1.25% 2.00% 1.00% 0.65%
Equity Income............................... 1.22% 1.97% 0.97% 0.50%
Growth...................................... 1.23% 1.98% 0.98% 0.60%
Mid-Cap Opportunity......................... 1.29% 2.04% 1.04% 0.60%
Small Cap Opportunity....................... 1.47% 2.22% 1.22% 0.70%
Intrinsic Value............................. 1.23% 1.98% 0.98% 0.60%
Growth and Value............................ 1.10% 1.85% 0.85% 0.60%
Equity Index................................ 0.63% 1.38% 0.38% 0.10%
International Equity........................ 1.42% 2.17% 1.17% 0.80%
Intermediate Bond........................... 1.00% 1.75% 0.75% 0.40%
Bond........................................ 1.00% 1.75% 0.75% 0.40%
Short Bond.................................. 0.82% 1.57% 0.57% 0.35%
Multi Sector Bond........................... 0.97% 1.72% 0.72% 0.40%
International Bond.......................... 1.15% 1.90% 0.90% 0.70%
High Yield Bond............................. 1.22% 1.97% 0.97% 0.70%
Municipal Bond.............................. 1.00% 1.75% 0.75% 0.40%
Intermediate Municipal Bond................. 0.93% 1.68% 0.68% 0.40%
Michigan Municipal Bond..................... 0.91% 1.66% 0.66% 0.40%
</TABLE>
Pegasus Funds
163
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
The Funds' Class A shares and Class B shares have a Shareholder Services Plan
(the Plan) pursuant to which the Funds pay BISYS (the Distributor) a fee, at an
annual rate not to exceed 0.25% of the value of the average daily net assets of
the outstanding Class A shares and Class B shares. Pursuant to the terms of the
Plan, the Distributor has agreed to provide certain shareholder services to the
holders of these shares. Additionally, under the terms of the Plan, the
Distributor may make payments to other shareholder service agents which may
include FCNIMCO, and its affiliates. For the period ended December 31, 1997,
the Funds paid the following amounts under the Plan to BISYS:
<TABLE>
<CAPTION>
AMOUNTS PAID
------------------------------------------
<S> <C>
Managed Assets Conservative $212,369
Managed Assets Balanced 227,499
Managed Assets Growth 11,202
Equity Income 39,117
Growth 102,466
Mid-Cap Opportunity 377,064
Small-Cap Opportunity 31,794
Intrinsic Value 124,239
Growth and Value 258,071
Equity Index 255,632
International Equity 50,089
Intermediate Bond 63,128
Bond 184,522
Short Bond 5,214
Multi Sector Bond 21,248
International Bond 11,192
High Yield Bond 10,707
Municipal Bond 79,751
Intermediate Municipal Bond 48,926
Michigan Municipal Bond 45,519
</TABLE>
Pegasus Funds
164
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
The Funds' Class B shares have a Distribution Plan adopted pursuant to Rule
12b-1 under the Act (12b-1 Plan) pursuant to which the Funds have agreed to pay
the Distributor for advertising, marketing and distributing Class B shares of
the Funds at an annual rate of 0.75% of the average daily net assets of the
Funds' outstanding Class B shares. Under the terms of the 12b-1 Plan, the
Distributor may make payments to FCNIMCO, and its affiliates with respect to
these services. A contingent deferred sales charge (CDSC) payable to the
Distributor is imposed on redemptions of Class B shares depending on the number
of years such shares were held by the investor. For the period ended December
31, 1997, the Funds made the following payments under the 12b-1 Plan, all of
which was retained by the Distributor:
<TABLE>
<CAPTION>
12B-1 FEES PAID CDSC PAID
-------------------------------------------------------
<S> <C> <C>
Managed Assets Conservative $65,931 $17,704
Managed Assets Balanced 36,033 8,652
Managed Assets Growth 17,451 2,481
Equity Income 16,641 4,356
Growth 9,894 4,042
Mid-Cap Opportunity 11,805 2,417
Small-Cap Opportunity 5,247 437
Intrinsic Value 10,205 5,337
Growth and Value 15,857 5,370
Equity Index 5,793 591
International Equity 10,134 345
Intermediate Bond 1,750 426
Bond 9,794 5,482
Short Bond 856 596
Multi Sector Bond 3,141 1,830
International Bond 536 74
High Yield Bond 536 36
Municipal Bond 6,553 2,648
Intermediate Municipal Bond 4,878 740
Michigan Municipal Bond 2,218 1,119
</TABLE>
Pegasus Funds
165
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS
Transactions in amounts and shares of the Funds are summarized below:
<TABLE>
<CAPTION>
MANAGED ASSETS CONSERVATIVE FUND MANAGED ASSETS BALANCED FUND
-------------------------------------------------------------------------------------------------------
<CAPTION>
MANAGED ASSETS GROWTH FUND
-------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $31,316,561 2,016,301 $20,672,516 1,371,854 $123,331,478 10,106,283 $ 8,045,626 678,833
Shares issued in
connection with
merger -- -- -- -- -- -- 9,463,276 852,362
Dividends rein-
vested 11,601,787 765,341 2,427,504 161,494 13,209,034 1,100,235 1,198,810 104,708
Shares redeemed (19,010,963) (1,222,958) (8,804,666) (591,724) (19,705,519) (1,614,532) (2,536,126) (221,289)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase $23,907,385 1,558,684 $14,295,354 941,624 $116,834,993 9,591,986 $16,171,586 1,414,614
- ---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 7,513,031 482,687 $ 3,312,172 232,887 $ 8,381,742 606,921 $ 1,011,447 79,339
Shares issued in
connection with
merger -- -- -- -- -- -- 807,188 66,363
Dividends rein-
vested 1,365,334 90,169 147,221 9,748 757,299 56,894 30,419 2,357
Shares redeemed (806,131) (52,379) (280,570) (18,618) (781,286) (56,066) (6,339) (515)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase $ 8,072,234 520,477 $ 3,178,823 224,017 $ 8,357,755 607,749 $ 1,842,715 147,544
- ---------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $17,213,041 1,103,175 $ 913,493 59,257 $ 54,963,342 4,828,990 $47,908,377 4,195,205
Shares issued in
connection with
merger -- -- -- -- -- -- 435,984 39,271
Dividends rein-
vested 1,051,898 69,270 11,882 782 11,078,389 924,980 8,382,967 741,471
Shares redeemed (9,054,523) (582,695) (784,575) (51,259) (72,178,198) (5,944,348) (41,766,635) (3,653,436)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase
(decrease) $ 9,210,416 589,750 $ 140,800 8,780 $ (6,136,467) (190,378) $14,960,693 1,322,511
- ---------------------------------------------------------------------------------------------------------------------
Net Increase in
Fund $41,190,035 2,668,911 $17,614,977 1,174,421 $119,056,281 10,009,357 $32,974,994 2,884,669
- ---------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 17, 1996
DECEMBER 31, 1997 TO DECEMBER 31, 1996
-------------------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 5,803,931 520,583 $ 75,494 7,476
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 110,631 9,677 -- --
Shares redeemed (447,060) (40,532) -- --
- ---------------------------------------------------------------------------------------------------------------------
Net Increase $ 5,467,502 489,728 $ 75,494 7,476
- ---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 5,710,882 519,712 $ 16,600 1,659
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 106,258 9,416 -- --
Shares redeemed (89,261) (7,937) -- --
- ---------------------------------------------------------------------------------------------------------------------
Net Increase $ 5,727,879 521,191 $ 16,600 1,659
- ---------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $ 743,108 64,957 $ 586,711 58,671
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 4 0 -- --
Shares redeemed -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net Increase
(decrease) $ 743,112 64,957 $ 586,711 58,671
- ---------------------------------------------------------------------------------------------------------------------
Net Increase in
Fund $11,938,493 1,075,876 $ 678,805 67,806
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
166
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INCOME FUND GROWTH FUND
------------------------------------------------ ---------------------------------------------------
<CAPTION>
MID-CAP OPPORTUNITY FUND
-----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- ----------------------- ------------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 6,572,559 468,697 $10,514,014 807,914 $ 40,045,445 2,775,581 $ 13,304,437 1,069,316
Shares issued in
connection with
merger -- -- -- -- -- -- 5,930,465 512,787
Dividends rein-
vested 1,844,995 139,990 739,802 56,518 2,790,818 182,621 981,447 83,551
Shares redeemed (8,712,198) (619,931) (1,604,818) (124,553) (9,366,705) (646,661) (2,311,238) (186,293)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ (294,644) (11,244) $ 9,648,998 739,879 $ 33,469,558 2,311,541 $ 17,905,111 1,479,361
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 1,438,787 101,560 $ 1,203,263 94,541 $ 1,483,297 101,867 $ 775,074 62,310
Shares issued in
connection with
merger -- -- -- -- -- -- -- --
Dividends rein-
vested 427,616 32,598 133,696 10,252 93,456 6,193 101,531 8,762
Shares redeemed (457,543) (34,137) (152,379) (11,467) (640,490) (49,812) (79,233) (6,367)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ 1,408,860 100,021 $ 1,184,580 93,326 $ 936,263 58,248 $ 797,372 64,705
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $28,432,275 2,026,742 $28,951,934 2,290,749 $ 78,761,960 5,522,672 $ 38,409,031 3,188,898
Shares issued in
connection with
merger -- -- -- -- -- -- 222,424,201 19,236,854
Dividends rein-
vested 34,772,811 2,674,370 16,347,833 1,253,457 23,951,009 1,567,312 30,380,321 2,552,247
Shares redeemed (69,797,438) (5,065,466) (39,544,438) (3,063,638) (155,347,564) (10,934,920) (90,415,801) (7,318,686)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $(6,592,352) (364,354) $ 5,755,329 480,568 $(52,634,595) (3,844,936) $200,797,752 17,659,313
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) in
Fund $(5,478,136) (275,577) $16,588,907 1,313,773 $(18,228,774) (1,475,147) $219,500,235 19,203,379
- ------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------- --------------------------
AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $130,158,919 6,412,767 $ 17,574,218 1,006,225
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 13,953,980 672,278 6,227,247 355,667
Shares redeemed (21,535,955) (1,077,836) (15,056,564) (907,440)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $122,576,944 6,007,209 $ 8,744,901 454,452
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 3,558,244 329,955 $ 152,182 15,014
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 388,813 37,100 10,897 1,143
Shares redeemed (93,380) (8,506) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ 3,853,677 358,549 $ 163,079 16,157
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $207,175,566 10,476,135 $133,986,518 8,000,078
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 46,220,847 2,224,010 39,593,425 2,261,096
Shares redeemed (253,407,120) (12,783,438) (167,383,102) (10,003,854)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ (10,707) (83,293) $ 6,196,841 257,320
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) in
Fund $126,419,914 6,282,465 $ 15,104,821 727,929
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
167
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
SMALL-CAP OPPORTUNITY FUND INTRINSIC VALUE FUND
------------------------------------------------- --------------------------------------------------
<CAPTION>
GROWTH AND VALUE FUND
------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------ ----------------------- ------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 16,824,149 1,022,192 $ 6,588,789 492,296 $ 60,372,454 3,925,383 $ 3,778,042 260,687
Shares issued in
connection with
merger -- -- -- -- -- -- -- --
Dividends rein-
vested 1,650,556 102,839 548,267 40,137 6,149,882 394,556 1,427,772 106,716
Shares redeemed (3,824,714) (251,988) (1,261,317) (98,737) (10,129,328) (667,288) (3,069,127) (237,189)
- ------------------------------------------------------------------------------------------------------------------------
Net increase
(Decrease) $ 14,649,991 873,043 $ 5,875,739 433,696 $ 56,393,008 3,652,651 $ 2,136,687 130,214
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 1,618,901 99,977 $ 88,109 6,603 $ 2,966,956 260,864 $ 175,620 $ 17,119
Shares issued in
connection with
merger -- -- -- -- -- -- -- --
Dividends rein-
vested 125,301 7,951 8,638 638 291,301 25,987 6,860 678
Shares redeemed (29,610) (1,796) (5,113) (378) (122,704) (10,630) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Increase $ 1,714,592 106,132 $ 91,634 6,863 $ 3,135,553 276,221 $ 182,480 17,797
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $ 78,449,597 4,974,079 $26,677,330 1,999,204 $190,470,760 12,535,439 $124,592,078 9,559,515
Shares issued in
connection with
merger -- -- -- -- -- -- -- --
Dividends rein-
vested 12,026,693 741,015 7,414,201 538,441 35,700,516 2,291,818 20,133,650 1,500,223
Shares redeemed (21,124,571) (1,399,602) (13,774,348) (1,044,928) (97,234,985) (6,443,872) (65,319,700) (5,010,787)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ 69,351,719 4,315,492 $20,317,183 1,492,717 $128,936,291 8,383,385 $ 79,406,028 6,048,951
- ------------------------------------------------------------------------------------------------------------------------
Net Increase in
Fund $ 85,716,302 5,294,667 $26,284,556 1,933,276 $188,464,852 12,312,257 $ 81,725,195 6,196,962
- ------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- --------------------------
AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 94,486,592 5,899,852 $ 10,751,493 754,822
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 12,755,356 781,070 5,837,373 408,916
Shares redeemed (15,125,603) (944,388) (10,821,842) (772,283)
- ------------------------------------------------------------------------------------------------------------------------
Net increase
(Decrease) $ 92,116,345 5,736,534 $ 5,767,024 391,455
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 4,612,966 444,913 180,906 17,956
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 517,650 50,518 15,917 1,688
Shares redeemed (145,758) (13,846) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Increase $ 4,984,858 481,585 $ 196,823 19,644
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $ 246,403,685 15,691,586 $131,866,602 9,320,587
Shares issued in
connection with
merger -- -- -- --
Dividends rein-
vested 58,038,310 3,548,746 61,731,381 4,321,440
Shares redeemed (262,615,759) (16,528,740) (195,990,296) (13,908,643)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) $ 41,826,236 2,711,592 $ (2,392,313) (266,616)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase in
Fund $ 138,927,439 8,929,711 $ 3,571,534 144,483
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
168
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX FUND INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE BOND FUND
--------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 168,016,201 8,416,137 $ 31,278,886 1,926,716 $ 18,567,566 1,519,426 $ 5,469,113 471,883
Shares issued in
connection with
merger -- -- -- -- -- -- 5,000,559 437,253
Dividends
reinvested 5,805,194 273,337 729,306 43,478 151,571 12,294 25,480 2,217
Shares redeemed (32,929,404) (1,733,288) (2,209,647) (143,624) (3,047,589) (247,544) (925,372) (80,361)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase $ 140,891,991 6,956,186 $ 29,798,545 1,826,570 $ 15,671,548 1,284,176 $ 9,569,780 830,992
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 1,287,388 104,699 $ 110,553 10,532 $ 811,445 70,622 $ 207,457 19,628
Shares issued in
connection with
merger -- -- -- -- -- -- 902,000 83,241
Dividends
reinvested 71,089 5,457 1,742 164 $ 7,275 630 3,879 363
Shares redeemed (57,785) (4,457) -- -- (201,965) (18,241) (12,832) (1,174)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase $ 1,300,692 105,699 $ 112,295 10,696 $ 616,755 53,011 $ 1,100,504 102,058
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $ 146,097,054 7,485,701 $399,191,656 26,322,675 $144,396,799 12,175,388 $156,316,681 13,690,888
Shares issued in
connection with
merger -- -- -- -- 25,851,101 2,159,636 139,065,560 12,158,206
Dividends
reinvested 16,894,585 811,344 24,591,838 1,507,939 1,488,912 120,663 1,166,795 101,789
Shares redeemed (524,752,379) (28,171,388) (235,108,926) (15,057,677) (89,221,490) (7,329,317) (28,938,741) (2,506,907)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase
(decrease) $ (361,760,740) (19,874,343) $188,674,568 12,772,937 $ 82,515,322 7,126,370 $267,610,295 23,443,976
- -----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
Fund $ (219,568,057) (12,812,458) $218,585,408 14,610,203 $ 98,803,625 8,463,557 $278,280,579 24,377,026
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 27,304,014 2,624,666 $ 8,796,002 850,551
Shares issued in
connection with
merger -- -- -- --
Dividends
reinvested 1,358,064 131,435 608,725 59,665
Shares redeemed (5,101,985) (493,064) (2,595,255) (254,168)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase $ 23,560,093 2,263,037 $ 6,809,472 656,048
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 278,873 27,172 $ 120,890 11,847
Shares issued in
connection with
merger -- -- -- --
Dividends
reinvested 8,536 833 726 71
Shares redeemed (29,302) (2,866) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase $ 258,107 25,139 $ 121,616 $ 11,918
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $185,976,995 18,003,953 $109,594,960 10,695,590
Shares issued in
connection with
merger -- -- -- --
Dividends
reinvested 16,511,264 1,601,349 18,582,923 1,823,614
Shares redeemed (123,282,895) (11,921,465) (123,973,501) (12,103,697)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase
(decrease) $ 79,205,364 7,683,837 $ 4,204,382 415,507
- -----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
Fund $103,023,564 9,972,013 $ 11,135,470 1,083,473
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
169
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
BOND FUND SHORT BOND FUND
--------------------------------------------------- -------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- ------------------------ ------------------------ -----------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 87,085,926 8,353,347 $ 18,025,833 1,759,192 $ 4,288,154 423,115 $ 483,891 47,570
Shares issued in
connection with
merger -- -- 3,578,204 354,183 -- -- -- --
Dividends rein-
vested 3,910,615 377,818 1,569,989 154,343 100,656 9,964 38,229 3,775
Shares redeemed (15,064,433) (1,455,779) (7,420,659) (728,002) (692,337) (68,358) (244,422) (24,031)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (De-
crease) $ 75,932,108 7,275,386 $ 15,753,367 1,539,716 $ 3,696,473 364,721 $ 277,698 27,314
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 3,156,452 303,186 $ 158,728 15,396 $ 500,749 49,815 $ 55,860 5,540
Shares issued in
connection with
merger -- -- 119,311 11,877 -- -- -- --
Dividends rein-
vested 60,268 5,791 3,723 365 4,017 400 494 50
Shares redeemed (164,690) (15,856) (4,168) (416) (20,443) (2,048) -- --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (De-
crease) $ 3,052,030 293,121 $ 277,594 27,222 $ 484,323 48,167 $ 56,354 5,590
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $435,649,178 42,208,448 $210,681,955 20,613,883 $131,425,104 12,981,562 $40,492,808 3,989,071
Shares issued in
connection with
merger -- -- 127,168,386 12,587,564 -- -- -- --
Dividends rein-
vested 32,769,206 3,176,489 28,011,422 2,757,955 4,521,387 447,631 3,936,671 388,760
Shares redeemed (157,152,393) (15,127,474) (88,910,686) (8,695,219) (73,190,834) (7,226,149) (33,628,814) (3,310,328)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase $311,265,991 30,257,463 $276,951,077 27,264,183 $ 62,755,657 6,203,044 $10,800,665 1,067,503
- --------------------------------------------------------------------------------------------------------------------------
Net Increase in
Fund $390,250,129 37,825,970 $292,982,038 28,831,121 $ 66,936,453 6,615,932 $11,134,717 1,100,407
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
170
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
MULTI SECTOR BOND FUND INTERNATIONAL BOND FUND
---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 2,346,273 298,883 $ 6,191,696 791,198 $ 5,057,792 501,600 $ 1,566,208 146,224
Shares issued in con-
nection with merger -- -- -- -- -- -- -- --
Dividends reinvested 481,710 61,412 416,055 53,191 173,729 17,298 47,338 4,420
Shares redeemed (3,919,756) (502,746) (3,419,713) (467,477) (554,465) (55,064) (107,494) (10,002)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) $ (1,091,773) (142,451) $ 3,188,038 376,912 $ 4,677,056 463,834 $ 1,506,052 140,642
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 235,272 29,850 $ 347,968 41,940 $ 104,851 10,315 $ 41,186 3,768
Shares issued in con-
nection with merger -- -- -- -- -- -- -- --
Dividends reinvested 18,480 2,347 17,672 2,263 2,380 235 541 50
Shares redeemed (230,668) (29,611) (93,950) (11,916) (29,856) (2,993) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) $ 23,084 2,586 $ 271,690 32,287 $ 77,375 7,557 $ 41,727 3,818
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $ 7,729,755 983,848 $55,297,081 7,020,090 $40,067,491 3,900,010 $40,613,308 3,806,690
Shares issued in con-
nection with merger -- -- -- -- -- -- -- --
Dividends reinvested 224,426 28,290 2,201,403 285,488 1,589,981 157,098 795,338 73,443
Shares redeemed (102,380,005) (13,037,412) (54,915,467) (6,929,097) (7,903,780) (780,766) (2,780,800) (259,630)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) $ (94,425,824) (12,025,274) $ 2,583,017 376,481 $33,753,692 3,276,342 $38,627,846 3,620,503
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
in Fund $ (95,494,513) (12,165,139) $ 6,042,745 785,680 $38,508,123 3,747,733 $40,175,625 3,764,963
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
171
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND MUNICIPAL BOND FUND
--------------------------------------------------------------
FOR THE PERIOD ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997(1) DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 566,077 55,462 $ 11,724,049 939,135 $ 13,226,966 1,061,821
Shares issued in connec-
tion with merger -- -- -- -- 11,575,160 947,394
Dividends reinvested 3,384 332 843,113 67,267 513,008 41,669
Shares redeemed -- -- (8,454,633) (681,140) (3,271,199) (264,538)
- -----------------------------------------------------------------------------------------------------
Net Increase $ 569,461 55,794 $ 4,112,529 325,262 $ 22,043,935 1,786,346
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 77,187 7,534 $ 733,512 58,222 $ 431,882 34,093
Shares issued in connec-
tion with merger -- -- -- -- -- --
Dividends reinvested 959 94 28,072 2,246 18,317 1,488
Shares redeemed (893) (87) (160,009) (12,772) -- --
- -----------------------------------------------------------------------------------------------------
Net Increase $ 77,253 7,541 $ 601,575 47,696 $ 450,199 35,581
- -----------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $50,211,813 4,945,400 $ 90,800,345 7,311,590 $ 42,748,779 3,495,568
Shares issued in connec-
tion with merger -- -- -- -- 91,002,940 7,456,140
Dividends reinvested 369,553 36,030 632,571 50,986 2,337,397 191,078
Shares redeemed (2,057,468) (200,949) (87,732,156) (7,051,329) (34,399,736) (2,790,753)
- -----------------------------------------------------------------------------------------------------
Net Increase $48,523,898 4,780,481 $ 3,700,760 311,247 $101,689,380 8,352,033
- -----------------------------------------------------------------------------------------------------
Net Increase in Fund $49,170,612 4,843,816 $ 8,414,864 684,205 $124,183,514 10,173,960
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period June 30, 1997 (Commencement of operations) through December
31, 1997.
Pegasus Funds
172
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6) CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE MUNICIPAL BOND FUND MICHIGAN MUNICIPAL BOND FUND
---------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Shares issued $ 4,330,436 356,402 $ 5,315,556 359,402 $ 1,862,834 175,504 $ 911,973 79,044
Shares issued in connec-
tion with merger -- -- -- -- -- -- -- --
Dividends reinvested 654,340 53,881 612,849 50,915 635,851 59,987 657,970 63,485
Shares redeemed (5,476,837) (450,630) (3,525,775) (287,987) (3,140,092) (297,510) (3,759,125) (354,815)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) $ (492,061) (40,347) $ 2,402,630 122,330 $ (641,407) (62,019) $(2,189,182) (212,286)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares issued $ 97,661 8,007 $ 303,103 24,223 $ 597,476 57,746 110,019 10,827
Shares issued in connec-
tion with merger -- -- -- -- -- -- -- --
Dividends reinvested 19,911 1,640 13,696 1,129 4,727 457 63 6
Shares redeemed (31,769) (2,641) (31,817) (2,637) (22,479) (2,223) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase $ 85,803 7,006 $ 284,982 22,715 $ 579,724 55,980 110,082 10,833
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares issued $68,404,127 5,629,130 $59,555,517 5,006,430 $23,854,404 2,244,429 $16,351,477 1,572,801
Shares issued in connec-
tion with merger -- -- -- -- -- -- -- --
Dividends reinvested 1,762,447 143,942 1,919,974 160,281 347,003 32,675 196,702 18,959
Shares redeemed (73,664,655) (6,056,270) (57,603,084) (4,790,142) (6,574,233) (622,964) (6,798,951) (652,256)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (3,498,081) (283,198) $ 3,872,407 376,569 17,627,174 1,654,140 9,749,228 939,504
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
in Fund $(3,904,339) (316,539) $ 6,560,019 521,614 $17,565,491 1,648,101 $ 7,670,128 738,051
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
173
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
See accompanying Notes to the Financial Statements.
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
IN EXCESS
OF NET
FROM NET REALIZED
TOTAL REALIZED GAIN ON
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON INVESTMENTS
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & AND FOREIGN
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY CURRENCY RETURN OF
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS TRANSACTIONS CAPITAL
--------- ---------- -------------- ---------- ---------- ---------- ---------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGED ASSETS CONSERVATIVE
CLASS A SHARES
December 31, 1997 $15.34 0.58 1.35 $ 1.93 (0.58) -- (1.74) -- --
December 31, 1996 $14.54 0.56 0.89 $ 1.45 (0.56) -- (0.09) -- --
December 31, 1995 $12.13 0.64 2.48 $ 3.12 (0.68) -- (0.03) -- --
December 31, 1994 $13.11 0.73 (0.98) $(0.25) (0.72) -- (0.01) -- --
December 31, 1993 $12.68 0.72 0.61 $ 1.33 (0.72) -- (0.18) -- --
December 31, 1992 $12.56 0.79 0.26 $ 1.05 (0.77) -- (0.16) -- --
CLASS B SHARES
December 31, 1997 $15.36 0.47 1.35 $ 1.82 (0.47) -- (1.74) -- --
December 31, 1996 $14.56 0.44 0.89 $ 1.33 (0.44) -- (0.09) -- --
For the period ended
12/31/1995(/2/) $12.42 0.45 2.17 $ 2.62 (0.45) -- (0.03) -- --
For the period ended
12/2/1994(/1/) $13.05 0.51 (0.91) $(0.40) (0.54) -- (0.01) -- --
CLASS I SHARES
December 31, 1997 $15.38 0.59 1.37 $ 1.96 (0.60) -- (1.74) -- --
December 31, 1996 $14.57 0.60 0.89 $ 1.49 (0.59) -- (0.09) -- --
For the period ended
12/31/1995(/4/) $12.42 0.57 2.18 $ 2.75 (0.57) -- (0.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
MANAGED ASSETS BALANCED
CLASS A SHARES
December 31, 1997 $11.63 0.32 1.43 $ 1.75 (0.31) -- (1.15) -- --
December 31, 1996 $11.24 0.35 1.06 $ 1.41 (0.34) -- (0.68) -- --
December 31, 1995 $ 9.53 0.35 1.83 $ 2.18 (0.35) -- (0.12) -- --
December 31, 1994 $10.00 0.28 (0.48) $(0.20) (0.27) -- -- -- --
CLASS B SHARES
December 31, 1997 $12.81 0.24 1.61 $ 1.85 (0.24) -- (1.15) -- --
For the period ended
12/31/1996(/5/) $12.16 0.08 0.81 $ 0.89 (0.07) -- (0.17) -- --
CLASS I SHARES
December 31, 1997 $11.59 0.34 1.47 $ 1.81 (0.34) -- (1.15) -- --
December 31, 1996 $11.24 0.39 1.02 $ 1.41 (0.38) -- (0.68) -- --
December 31, 1995 $ 9.53 0.35 1.83 $ 2.18 (0.35) -- (0.12) -- --
December 31, 1994 $10.00 0.28 (0.48) $(0.20) (0.27) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
MANAGED ASSETS GROWTH
CLASS A SHARES
December 31, 1997 $10.08 0.17 1.60 $ 1.77 (0.16) -- (0.18) -- --
For the period ended
12/31/1996(/6/) $10.00 0.00 0.08 $ 0.08 0.00 -- -- -- --
CLASS B SHARES
December 31, 1997 $ 9.99 0.11 1.55 $ 1.66 (0.12) -- (0.18) -- --
For the period ended
12/31/1996(/6/) $10.00 0.00 (0.01) $(0.01) 0.00 -- -- -- --
CLASS I SHARES
December 31, 1997 $10.13 0.21 1.59 $ 1.80 (0.18) -- (0.18) -- --
For the period ended
12/31/1996(/6/) $10.00 0.00 0.13 $ 0.13 0.00 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------
TOTAL
DISTRIBUTIONS
-------------
<S> <C>
MANAGED ASSETS CONSERVATIVE
CLASS A SHARES
December 31, 1997 $(2.32)
December 31, 1996 $(0.65)
December 31, 1995 $(0.71)
December 31, 1994 $(0.73)
December 31, 1993 $(0.90)
December 31, 1992 $(0.93)
CLASS B SHARES
December 31, 1997 $(2.21)
December 31, 1996 $(0.53)
For the period ended
12/31/1995(/2/) $(0.48)
For the period ended
12/2/1994(/1/) $(0.55)
CLASS I SHARES
December 31, 1997 $(2.34)
December 31, 1996 $(0.68)
For the period ended
12/31/1995(/4/) $(0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
MANAGED ASSETS BALANCED
CLASS A SHARES
December 31, 1997 $(1.46)
December 31, 1996 $(1.02)
December 31, 1995 $(0.47)
December 31, 1994 $(0.27)
CLASS B SHARES
December 31, 1997 $(1.39)
For the period ended
12/31/1996(/5/) $(0.24)
CLASS I SHARES
December 31, 1997 $(1.49)
December 31, 1996 $(1.06)
December 31, 1995 $(0.47)
December 31, 1994 $(0.27)
- ----------------------------------------------------------------------------------------------------------------------------------
MANAGED ASSETS GROWTH
CLASS A SHARES
December 31, 1997 $(0.34)
For the period ended
12/31/1996(/6/) $ 0.00
CLASS B SHARES
December 31, 1997 $(0.30)
For the period ended
12/31/1996(/6/) $ 0.00
CLASS I SHARES
December 31, 1997 $(0.36)
For the period ended
12/31/1996(/6/) $ 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
174
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE AVERAGE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO COMMISSION
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%) RATE
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- (0.39) $14.95 13.10% $ 90,835 1.24% 3.74% 1.33% 102.37% $0.0524
-- 0.80 $15.34 10.11% $ 69,301 1.18% 3.64% 1.33% 63.41% $0.0526
-- 2.41 $14.54 26.40% $ 51,997 1.17% 4.88% 1.54% 8.23% --
-- (0.98) $12.13 (1.92%) $ 44,367 0.63% 5.77% 1.67% 28.69% --
-- 0.43 $13.11 10.70% $ 51,586 0.39% 5.54% 1.65% 16.40% --
-- 0.12 $12.68 8.68% $ 34,262 0.02% 6.24% 1.88% 22.14% --
-- (0.39) $14.97 12.29% $ 13,378 1.99% 2.99% 2.08% 102.37% $0.0524
-- 0.80 $15.36 9.26% $ 5,736 1.93% 2.89% 2.07% 63.41% $0.0526
-- 2.14 $14.56 21.42%++ $ 2,175 1.92%+ 3.89%+ 2.12%+ 8.23%++ --
(12.10) (0.95) -- (3.13%) -- 1.21%+ 4.10%+ 2.17%+ 28.69%++ --
-- (0.38) $15.00 13.34% $ 10,309 0.99% 3.99% 1.08% 102.37% $0.0524
-- 0.81 $15.38 10.43% $ 1,501 0.93% 3.89% 1.19% 63.41% $0.0526
-- 2.15 $14.57 22.55%++ $ 1,294 0.77%+ 5.12%+ 1.22%+ 8.23%++ --
- --------------------------------------------------------------------------------------------------------------------------------
-- 0.29 $11.92 15.28% $141,804 1.24% 2.71% 1.32% 116.87% $0.0527
-- 0.39 $11.63 12.99% $ 26,775 1.09% 3.13% 1.16% 50.50% $0.0711
-- 1.71 $11.24 23.18% $ 9,986 0.91% 3.40% 1.09% 31.76% --
-- (0.47) $ 9.53 (1.95%) $ 8,168 0.85% 3.41% 1.56% 37.49% --
-- 0.46 $13.27 14.59% $ 10,026 1.99% 1.96% 2.07% 116.87% $0.0527
-- 0.65 $12.81 7.30%++ $ 1,890 1.96%+ 1.35%+ 2.03%+ 50.50% $0.0711
-- 0.32 $11.91 15.79% $102,042 0.99% 2.96% 1.07% 116.87% $0.0527
-- 0.35 $11.59 13.04% $101,596 0.94% 3.28% 1.01% 50.50% $0.0711
-- 1.71 $11.24 23.18% $ 83,638 0.91% 3.40% 1.09% 31.76% --
-- (0.47) $ 9.53 (1.95%) $ 45,999 0.85% 3.41% 1.56% 37.49% --
- --------------------------------------------------------------------------------------------------------------------------------
-- 1.43 $11.51 17.75% $ 5,725 1.24% 1.69% 2.29% 39.35% --
-- 0.08 $10.08 0.80%++ $ 75 1.20%+ (0.45%)+ (3.50%)+ 0.00% --
-- 1.36 $11.35 16.69% $ 5,936 1.99% 0.94% 3.04% 39.35% --
-- (0.01) $ 9.99 (0.10%)++ $ 17 1.95%+ (1.20%)+ (4.25%)+ 0.00% --
-- 1.44 $11.57 17.87% $ 1,430 0.99% 1.94% 2.04% 39.35% --
-- 0.13 $10.13 1.30%++ $ 594 0.95%+ 0.20%+ (3.25%)+ 0.00% --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
175
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
FROM NET
TOTAL REALIZED IN EXCESS
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON OF NET
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS INVESTMENTS
--------- ---------- -------------- ---------- ---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME
CLASS A SHARES
December 31, 1997 $13.29 0.41 2.37 $ 2.78 (0.41) -- (2.60) --
December 31, 1996 $12.22 0.39 1.90 $ 2.29 (0.38) -- (0.84) --
For the period ended
12/31/1995(/7/) $10.00 0.36 2.57 $ 2.93 (0.36) (0.01) (0.34) --
CLASS B SHARES
December 31, 1997 $13.28 0.29 2.39 $ 2.68 (0.31) -- (2.60) --
December 31, 1996 $12.22 0.30 1.88 $ 2.18 (0.28) -- (0.84) --
For the period ended
12/31/1995(/7/) $10.00 0.29 2.56 $ 2.85 (0.29) -- (0.34) --
CLASS I SHARES
December 31, 1997 $13.25 0.44 2.38 $ 2.82 (0.45) -- (2.60) --
December 31, 1996 $12.21 0.45 1.87 $ 2.32 (0.44) -- (0.84) --
For the period ended
12/31/1995(/7/) $10.00 0.42 2.55 $ 2.97 (0.42) -- (0.34) --
- --------------------------------------------------------------------------------------------------------------------------
GROWTH
CLASS A SHARES
December 31, 1997 $12.64 (0.01) 3.40 $ 3.39 0.00 -- (0.96) --
December 31, 1996 $11.97 0.05 1.04 $ 1.09 (0.06) -- (0.36) --
For the period ended
12/31/1995(/7/) $10.00 0.11 2.86 $ 2.97 (0.11) -- (0.89) --
CLASS B SHARES
December 31, 1997 $12.56 (0.06) 3.32 $ 3.26 0.00 -- (0.96) --
December 31, 1996 $11.95 (0.02) 0.99 $ 0.97 0.00 -- (0.36) --
For the period ended
12/31/1995(/7/) $10.00 0.06 2.84 $ 2.90 (0.06) -- (0.89) --
CLASS I SHARES
December 31, 1997 $12.63 0.02 3.41 $ 3.43 (0.02) -- (0.96) --
December 31, 1996 $11.97 0.09 1.02 $ 1.11 (0.09) -- (0.36) --
For the period ended
12/31/1995(/7/) $10.00 0.15 2.86 $ 3.01 (0.15) -- (0.89) --
- --------------------------------------------------------------------------------------------------------------------------
MID-CAP OPPORTUNITY
CLASS A SHARES
December 31, 1997 $17.61 (0.03) 4.87 $ 4.84 0.00 -- (1.56) --
December 31, 1996 $15.15 0.02 3.74 $ 3.76 (0.02) -- (1.28) --
December 31, 1995 $13.34 0.06 2.57 $ 2.63 (0.06) -- (0.76) --
December 31, 1994 $14.49 0.07 (0.54) $(0.47) (0.07) -- (0.49) (0.02)
December 31, 1993 $12.37 0.10 2.87 $ 2.97 (0.10) -- (0.75) --
December 31,
1992(/2//2/) $10.95 0.08 1.88 $ 1.96 (0.08) -- (0.46) --
CLASS B SHARES
December 31, 1997 $ 9.57 (0.03) 2.60 $ 2.57 0.00 -- (1.56) --
December 31, 1996(/8/) $10.00 0.00 0.79 $ 0.79 (0.01) -- (1.21) --
CLASS I SHARES
December 31, 1997 $17.61 0.01 4.88 $ 4.89 (0.01) -- (1.56) --
December 31, 1996 $15.15 0.04 3.74 $ 3.78 (0.04) -- (1.28) --
December 31, 1995 $13.34 0.06 2.57 $ 2.63 (0.06) -- (0.76) --
December 31, 1994 $14.49 0.07 (0.54) $(0.47) (0.07) -- (0.49) (0.02)
December 31, 1993 $12.37 0.10 2.87 $ 2.97 (0.10) -- (0.75) --
December 31, 1992 $10.40 0.11 2.43 $ 2.54 (0.11) -- (0.46) --
<CAPTION>
-----------------------
RETURN OF TOTAL
CAPITAL DISTRIBUTIONS
--------- -------------
<S> <C> <C>
EQUITY INCOME
CLASS A SHARES
December 31, 1997 -- $(3.01)
December 31, 1996 -- $(1.22)
For the period ended
12/31/1995(/7/) -- $(0.71)
CLASS B SHARES
December 31, 1997 -- $(2.91)
December 31, 1996 -- $(1.12)
For the period ended
12/31/1995(/7/) -- $(0.63)
CLASS I SHARES
December 31, 1997 -- $(3.05)
December 31, 1996 -- $(1.28)
For the period ended
12/31/1995(/7/) -- $(0.76)
- --------------------------------------------------------------------------------------------------------------------------
GROWTH
CLASS A SHARES
December 31, 1997 -- $(0.96)
December 31, 1996 -- $(0.42)
For the period ended
12/31/1995(/7/) -- $(1.00)
CLASS B SHARES
December 31, 1997 -- $(0.96)
December 31, 1996 -- $(0.36)
For the period ended
12/31/1995(/7/) -- $(0.95)
CLASS I SHARES
December 31, 1997 -- $(0.98)
December 31, 1996 -- $(0.45)
For the period ended
12/31/1995(/7/) -- $(1.04)
- --------------------------------------------------------------------------------------------------------------------------
MID-CAP OPPORTUNITY
CLASS A SHARES
December 31, 1997 -- $(1.56)
December 31, 1996 -- $(1.30)
December 31, 1995 -- $(0.82)
December 31, 1994 (0.10) $(0.68)
December 31, 1993 -- $(0.85)
December 31,
1992(/2//2/) -- $(0.54)
CLASS B SHARES
December 31, 1997 -- $(1.56)
December 31, 1996(/8/) -- $(1.22)
CLASS I SHARES
December 31, 1997 -- $(1.57)
December 31, 1996 -- $(1.32)
December 31, 1995 -- $(0.82)
December 31, 1994 (0.10) $(0.68)
December 31, 1993 -- $(0.85)
December 31, 1992 -- $(0.57)
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
176
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE AVERAGE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO COMMISSION
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%) RATE
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- (0.23) $13.06 21.57% $ 12,583 0.95% 2.90% -- 41.31% $0.0471
-- 1.07 $13.29 19.29% $ 12,956 0.91% 3.29% 0.95% 61.41% $0.0422
-- 2.22 $12.22 29.78%++ $ 2,873 1.11%+ 3.33%+ 1.44%+ 44.07%++ --
-- (0.23) $13.05 20.73% $ 3,157 1.70% 2.15% -- 41.31% $0.0471
-- 1.06 $13.28 18.28% $ 1,885 1.66% 2.54% 1.81% 61.41% $0.0422
-- 2.22 $12.22 28.97%++ $ 593 1.90%+ 2.65%+ 2.65%+ 44.07%++ --
-- (0.23) $13.02 21.95% $304,260 0.70% 3.15% -- 41.31% $0.0471
-- 1.04 $13.25 19.58% $314,649 0.66% 3.54% 0.74% 61.41% $0.0422
-- 2.21 $12.21 30.27%++ $283,927 0.65%+ 4.08%+ 0.77%+ 44.07%++ --
- -------------------------------------------------------------------------------------------------------------------------------
-- 2.43 $15.07 26.76% $ 62,562 1.04% (0.08%) -- 22.89% $0.0478
-- 0.67 $12.64 20.10% $ 23,273 1.04% 0.43% 1.07% 61.95% $0.0176
-- 1.97 $11.97 29.98%++ $ 4,329 1.21%+ 0.86%+ 1.39%+ 106.02%++ --
-- 2.30 $14.86 25.90% $ 2,161 1.79% (0.83%) -- 22.89% $0.0478
-- 0.61 $12.56 19.04% $ 1,094 1.79% (0.32%) 1.89% 61.95% $0.0176
-- 1.95 $11.95 29.15%++ $ 268 2.04%+ 0.02%+ 2.60%+ 106.02%++ --
-- 2.45 $15.08 27.10% $578,490 0.79% 0.17% -- 22.89% $0.0478
-- 0.66 $12.63 20.36% $533,406 0.79% 0.68% 0.85% 61.95% $0.0176
-- 1.97 $11.97 30.38%++ $293,944 0.80%+ 1.46%+ 0.92%+ 106.02%++ --
- -------------------------------------------------------------------------------------------------------------------------------
-- 3.28 $20.89 27.56% $234,020 1.09% (0.20%) -- 37.54%(25) $0.0464
-- 2.46 $17.61 24.91% $ 91,516 0.93% 0.12% -- 34.87% $0.0354
-- 1.81 $15.15 19.88% $ 71,858 0.89% 0.37% -- 53.55% --
-- (1.15) $13.34 (3.27%) $ 64,326 0.90% 0.53% -- 37.51% --
-- 2.12 $14.49 24.01% $ 53,977 0.86% 0.71% -- 33.99% --
-- 1.42 $12.37 27.93% $ 5,111 0.85%+ 1.05%+ -- 34.44%+ --
-- 1.01 $10.58 27.10% $ 3,965 1.84% (0.95%) -- 37.54%(25) $0.0464
-- (0.43) $ 9.57 7.94%++ $ 154 1.81%+ (0.59%)+ -- 34.87% $0.0354
-- 3.32 $20.93 27.91% $803,670 0.84% 0.05% -- 37.54%(25) $0.0464
-- 2.46 $17.61 25.03% $677,608 0.81% 0.24% -- 34.87% $0.0354
-- 1.81 $15.15 19.88% $579,094 0.89% 0.37% -- 53.55% --
-- (1.15) $13.34 (3.27%) $460,673 0.90% 0.53% -- 37.51% --
-- 2.12 $14.49 24.01% $311,688 0.86% 0.71% -- 33.99% --
-- 1.97 $12.37 24.56% $161,312 0.84% 1.09% -- 34.44% --
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
177
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
FROM NET
TOTAL REALIZED IN EXCESS
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON OF NET
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS INVESTMENTS
--------- ---------- -------------- ---------- ---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMALL-CAP OPPORTUNITY
CLASS A SHARES
December 31, 1997 $13.70 (0.06) 4.16 $ 4.10 -- -- (1.77) --
December 31, 1996 $12.20 (0.02) 3.02 $ 3.00 -- -- (1.50) --
For the period ended
12/31/1995(/7/) $10.00 0.02 2.45 $ 2.47 (0.02) -- (0.25) --
CLASS B SHARES
December 31, 1997 $13.58 (0.07) 4.00 $ 3.93 -- -- (1.77) --
December 31, 1996 $12.12 (0.04) 3.00 $ 2.96 -- -- (1.50) --
For the period ended
12/31/1995(/7/) $10.00 (0.03) 2.40 $ 2.37 -- -- (0.25) --
CLASS I SHARES
December 31, 1997 $13.80 (0.05) 4.24 $ 4.19 -- -- (1.77) --
December 31, 1996 $12.19 (0.01) 3.13 $ 3.12 -- (0.01) (1.50) --
For the period ended
12/31/1995(/7/) $10.00 0.06 2.44 $ 2.50 (0.06) -- (0.25) --
- --------------------------------------------------------------------------------------------------------------------------
INTRINSIC VALUE
CLASS A SHARES
December 31, 1997 $13.70 0.23 3.17 $ 3.40 (0.24) -- (1.20) --
December 31, 1996 $11.89 0.28 2.50 $ 2.78 (0.28) -- (0.69) --
December 31, 1995 $10.48 0.29 2.24 $ 2.53 (0.30) -- (0.82) --
December 31, 1994 $11.05 0.31 (0.38) $(0.07) (0.30) -- (0.20) --
December 31, 1993 $10.40 0.29 1.23 $ 1.52 (0.28) -- (0.59) --
December 31,
1992(/2//2/) $10.70 0.22 0.33 $ 0.55 (0.21) -- (0.64) --
CLASS B SHARES
December 31, 1997 $10.18 0.25 2.19 $ 2.44 (0.19) -- (1.20) --
December 31, 1996(/8/) $10.00 0.04 0.79 $ 0.83 (0.06) -- (0.59) --
CLASS I SHARES
December 31, 1997 $13.71 0.28 3.15 $ 3.43 (0.27) -- (1.20) --
December 31, 1996 $11.89 0.29 2.51 $ 2.80 (0.29) -- (0.69) --
December 31, 1995 $10.48 0.29 2.24 $ 2.53 (0.30) -- (0.82) --
December 31, 1994 $11.05 0.31 (0.38) $(0.07) (0.30) -- (0.20) --
December 31, 1993 $10.40 0.29 1.23 $ 1.52 (0.28) -- (0.59) --
December 31, 1992 $ 9.89 0.29 1.14 $ 1.43 (0.28) -- (0.64) --
- --------------------------------------------------------------------------------------------------------------------------
GROWTH AND VALUE
CLASS A SHARES
December 31, 1997 $14.12 0.10 3.78 $ 3.88 (0.11) -- (1.51) --
December 31, 1996 $13.16 0.16 2.37 $ 2.53 (0.16) -- (1.41) --
December 31, 1995 $10.67 0.21 2.76 $ 2.97 (0.22) -- (0.26) --
December 31, 1994 $11.16 0.23 (0.17) $ 0.06 (0.21) -- (0.30) (0.01)
December 31, 1993 $10.51 0.20 1.24 $ 1.44 (0.20) -- (0.59) --
December 31,
1992(/2//2/) $10.16 0.17 0.45 $ 0.62 (0.17) -- (0.10) --
CLASS B SHARES
December 31, 1997 $ 9.32 0.07 2.38 $ 2.45 (0.07) -- (1.51) --
December 31, 1996(/8/) $10.00 0.01 0.62 $ 0.63 (0.03) -- (1.28) --
CLASS I SHARES
December 31, 1997 $14.12 0.14 3.79 $ 3.93 (0.15) -- (1.51) --
December 31, 1996 $13.16 0.18 2.36 $ 2.54 (0.17) -- (1.41) --
December 31, 1995 $10.67 0.21 2.76 $ 2.97 (0.22) -- (0.26) --
December 31, 1994 $11.16 0.23 (0.17) $ 0.06 (0.21) -- (0.30) (0.01)
December 31, 1993 $10.51 0.20 1.24 $ 1.44 (0.20) -- (0.59) --
December 31, 1992 $ 9.86 0.22 0.75 $ 0.97 (0.22) -- (0.10) --
<CAPTION>
-----------------------
RETURN OF TOTAL
CAPITAL DISTRIBUTIONS
--------- -------------
<S> <C> <C>
SMALL-CAP OPPORTUNITY
CLASS A SHARES
December 31, 1997 -- $(1.77)
December 31, 1996 -- $(1.50)
For the period ended
12/31/1995(/7/) -- $(0.27)
CLASS B SHARES
December 31, 1997 -- $(1.77)
December 31, 1996 -- $(1.50)
For the period ended
12/31/1995(/7/) -- $(0.25)
CLASS I SHARES
December 31, 1997 -- $(1.77)
December 31, 1996 -- $(1.51)
For the period ended
12/31/1995(/7/) -- $(0.31)
- --------------------------------------------------------------------------------------------------------------------------
INTRINSIC VALUE
CLASS A SHARES
December 31, 1997 -- $(1.44)
December 31, 1996 -- $(0.97)
December 31, 1995 -- $(1.12)
December 31, 1994 -- $(0.50)
December 31, 1993 -- $(0.87)
December 31,
1992(/2//2/) -- $(0.85)
CLASS B SHARES
December 31, 1997 -- $(1.39)
December 31, 1996(/8/) -- $(0.65)
CLASS I SHARES
December 31, 1997 -- $(1.47)
December 31, 1996 -- $(0.98)
December 31, 1995 -- $(1.12)
December 31, 1994 -- $(0.50)
December 31, 1993 -- $(0.87)
December 31, 1992 -- $(0.92)
- --------------------------------------------------------------------------------------------------------------------------
GROWTH AND VALUE
CLASS A SHARES
December 31, 1997 -- $(1.62)
December 31, 1996 -- $(1.57)
December 31, 1995 -- $(0.48)
December 31, 1994 (0.03) $(0.55)
December 31, 1993 -- $(0.79)
December 31,
1992(/2//2/) -- $(0.27)
CLASS B SHARES
December 31, 1997 -- $(1.58)
December 31, 1996(/8/) -- $(1.31)
CLASS I SHARES
December 31, 1997 -- $(1.66)
December 31, 1996 -- $(1.58)
December 31, 1995 -- $(0.48)
December 31, 1994 (0.03) $(0.55)
December 31, 1993 -- $(0.79)
December 31, 1992 -- $(0.32)
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
178
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE AVERAGE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO COMMISSION
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%) RATE
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- 2.33 $16.03 30.16% $ 21,836 1.18% (0.68%) -- 58.29% $0.0474
-- 1.50 $13.70 24.59% $ 6,697 1.13% (0.29%) 1.24% 93.82% $0.0501
-- 2.20 $12.20 24.80%++ $ 672 1.25%+ 0.19%+ 2.56%+ 38.89%++ --
-- 2.16 $15.74 29.17% $ 1,799 1.93% (1.43%) -- 58.29% $0.0474
-- 1.46 $13.58 24.42% $ 110 1.88% (1.04%) 3.04% 93.82% $0.0501
-- 2.12 $12.12 23.76%++ $ 15 2.00%+ (0.51%)+ 9.52%+ 38.89%++ --
-- 2.42 $16.22 30.60% $217,908 0.93% (0.43%) -- 58.29% $0.0474
-- 1.61 $13.80 25.63% $125,840 0.88% (0.04%) 1.02% 93.82% $0.0501
-- 2.19 $12.19 25.08%++ $ 92,926 0.85%+ 0.59%+ 1.09%+ 38.89%++ --
- ---------------------------------------------------------------------------------------------------------------------------------
-- 1.96 $15.66 25.03% $ 82,791 1.06% 1.64% -- 35.93%(25) $0.0465
-- 1.81 $13.70 23.79% $ 22,370 0.94% 2.16% -- 34.24% $0.0380
-- 1.41 $11.89 24.38% $ 17,858 0.91% 2.49% -- 45.55% --
-- (0.57) $10.48 (0.60%) $ 15,730 0.91% 2.92% -- 58.62% --
-- 0.65 $11.05 14.71% $ 14,098 0.86% 2.67% -- 63.90% --
-- (0.30) $10.40 6.82% $ 4,729 0.85%+ 3.12%+ -- 48.52%+ --
-- 1.05 $11.23 24.24% $ 3,302 1.81% 0.89% -- 35.93%(25) $0.0465
-- 0.18 $10.18 8.31%++ $ 182 1.81%+ 0.25%+ -- 34.24%+ $0.0380
-- 1.96 $15.67 25.25% $539,948 0.81% 1.89% -- 35.93%(25) $0.0465
-- 1.82 $13.71 23.99% $357,360 0.83% 2.27% -- 34.24% $0.0380
-- 1.41 $11.89 24.38% $238,027 0.91% 2.49% -- 45.55% --
-- (0.57) $10.48 (0.60%) $204,298 0.91% 2.92% -- 58.62% --
-- 0.65 $11.05 14.71% $178,457 0.86% 2.67% -- 63.90% --
-- 0.51 $10.40 14.56% $102,532 0.84% 2.78% -- 48.52% --
- ---------------------------------------------------------------------------------------------------------------------------------
-- 2.26 $16.38 27.80% $162,393 1.09% 0.67% 1.10% 30.98% $0.0473
-- 0.96 $14.12 19.24% $ 59,027 0.91% 1.17% -- 43.21% $0.0448
-- 2.49 $13.16 28.04% $ 49,872 0.84% 1.73% -- 26.80% --
-- (0.49) $10.67 0.55% $ 42,274 0.84% 2.07% -- 28.04% --
-- 0.65 $11.16 13.79% $ 29,467 0.83% 1.84% -- 42.31% --
-- 0.35 $10.51 8.19% $ 4,338 0.83%+ 2.49%+ -- 16.28%+ --
-- 0.87 $10.19 26.90% $ 5,107 1.84% (0.08%) 1.85% 30.98% $0.0473
-- (0.68) $ 9.32 6.10%++ $ 183 1.80%+ 0.25%+ -- 43.21%+ $0.0448
-- 2.27 $16.39 28.15% $895,567 0.84% 0.92% 0.85% 30.98% $0.0473
-- 0.96 $14.12 19.35% $733,632 0.80% 1.28% -- 43.21% $0.0448
-- 2.49 $13.16 28.04% $687,295 0.84% 1.73% -- 26.80% --
-- (0.49) $10.67 0.55% $529,097 0.84% 2.07% -- 28.04% --
-- 0.65 $11.16 13.79% $400,168 0.83% 1.84% -- 42.31% --
-- 0.65 $10.51 9.87% $283,007 0.83% 2.20% -- 16.28% --
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
179
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS
TOTAL
NET ASSET NET REALIZED INCOME IN EXCESS
VALUE, NET AND UNREALIZED FROM FROM NET OF NET
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME
--------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EQUITY INDEX
CLASS A SHARES
December 31, 1997 $16.75 0.26 5.19 $5.45 (0.26) --
December 31, 1996 $14.15 0.30 2.85 $3.15 (0.29) --
December 31, 1995 $10.65 0.30 3.65 $3.95 (0.31) --
December 31, 1994 $11.15 0.31 (0.20) $0.11 (0.30) --
December 31, 1993 $10.52 0.28 0.75 $1.03 (0.27) --
December 31,
1992(/2//3/) $10.00 0.12 0.52 $0.64 (0.12) --
CLASS B SHARES
December 31, 1997 $10.50 0.15 3.15 $3.30 (0.21) --
December 31, 1996(/8/) $10.00 0.05 0.76 $0.81 (0.06) --
CLASS I SHARES
December 31, 1997 $16.75 0.30 5.20 $5.50 (0.30) --
December 31, 1996 $14.15 0.31 2.85 $3.16 (0.30) --
December 31, 1995 $10.65 0.30 3.65 $3.95 (0.31) --
December 31, 1994 $11.15 0.31 (0.20) $0.11 (0.30) --
December 31, 1993 $10.52 0.28 0.75 $1.03 (0.27) --
December 31,
1992(/2//3/) $10.00 0.12 0.52 $0.64 (0.12) --
- ---------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
CLASS A SHARES
December 31, 1997 $11.77 0.07 0.36 $0.43 (0.09) --
December 31, 1996 $11.05 0.10 0.72 $0.82 (0.10) --
December 31, 1995 $10.01 0.10 1.05 $1.15 (0.11) --
CLASS B SHARES
December 31, 1997 $11.08 0.01 0.34 $0.35 (0.06) --
December 31, 1996(/5/) $10.84 0.04 0.24 $0.28 (0.04) --
CLASS I SHARES
December 31, 1997 $11.79 0.10 0.37 $0.47 (0.12) --
December 31, 1996 $11.05 0.11 0.74 $0.85 (0.11) --
December 31, 1995 $10.01 0.10 1.05 $1.15 (0.11) --
December 31, 1994(/9/) $10.00 0.01 -- $0.01 -- --
<CAPTION>
LESS DISTRIBUTIONS
----------------------------------------------------
FROM NET
REALIZED IN EXCESS
GAIN ON OF NET
INVESTMENTS & REALIZED
FOREIGN CURRENCY GAIN ON RETURN OF TOTAL
TRANSACTIONS INVESTMENTS CAPITAL DISTRIBUTIONS
---------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
EQUITY INDEX
CLASS A SHARES
December 31, 1997 (0.58) -- -- $(0.84)
December 31, 1996 (0.26) -- -- $(0.55)
December 31, 1995 (0.14) -- -- $(0.45)
December 31, 1994 (0.23) (0.08) -- $(0.61)
December 31, 1993 (0.13) -- -- $(0.40)
December 31,
1992(/2//3/) -- -- -- $(0.12)
CLASS B SHARES
December 31, 1997 (0.58) -- -- $(0.79)
December 31, 1996(/8/) (0.25) -- -- $(0.31)
CLASS I SHARES
December 31, 1997 (0.58) -- -- $(0.88)
December 31, 1996 (0.26) -- -- $(0.56)
December 31, 1995 (0.14) -- -- $(0.45)
December 31, 1994 (0.23) (0.08) -- $(0.61)
December 31, 1993 (0.13) -- -- $(0.40)
December 31,
1992(/2//3/) -- -- -- $(0.12)
- ---------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
CLASS A SHARES
December 31, 1997 $0.00 -- -- $(0.09)
December 31, 1996 (0.00) -- -- $(0.10)
December 31, 1995 (0.00) -- -- $(0.11)
CLASS B SHARES
December 31, 1997 -- -- -- $(0.06)
December 31, 1996(/5/) -- -- -- $(0.04)
CLASS I SHARES
December 31, 1997 -- -- -- $(0.12)
December 31, 1996 -- -- -- $(0.11)
December 31, 1995 -- -- -- $(0.11)
December 31, 1994(/9/) -- -- -- $(0.00)
- ---------------------------------------------------------------------------------------------
INTERMEDIATE BOND
CLASS A SHARES
December 31, 1997 $10.29 0.62 0.18 $0.80 (0.62) --
December 31, 1996 $10.37 0.64 (0.07) $0.57 (0.65) --
December 31, 1995 $ 9.21 0.59 1.16 $1.75 (0.59) --
December 31, 1994 $10.41 0.56 (1.20) ($0.64) (0.55) --
December 31, 1993 $10.28 0.59 0.26 $0.85 (0.59) --
December 31,
1992(/2//2/) $10.32 0.49 0.13 $0.62 (0.49) --
CLASS B SHARES
December 31, 1997 $10.20 0.55 0.17 $0.72 (0.54) --
December 31, 1996(/8/) $10.00 0.15 0.20 $0.35 (0.15) --
CLASS I SHARES
December 31, 1997 $10.29 0.65 0.18 $0.83 (0.64) --
December 31, 1996 $10.37 0.64 (0.07) $0.57 (0.65) --
December 31, 1995 $ 9.21 0.59 1.16 $1.75 (0.59) --
December 31, 1994 $10.41 0.56 (1.20) ($0.64) (0.55) --
December 31, 1993 $10.28 0.59 0.26 $0.85 (0.59) --
December 31, 1992 $10.55 0.71 (0.10) $0.61 (0.71) --
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
INTERMEDIATE BOND
CLASS A SHARES
December 31, 1997 -- -- -- $(0.62)
December 31, 1996 -- -- -- $(0.65)
December 31, 1995 -- -- -- $(0.59)
December 31, 1994 (0.01) -- -- $(0.56)
December 31, 1993 (0.13) -- -- $(0.72)
December 31,
1992(/2//2/) (0.17) -- -- $(0.66)
CLASS B SHARES
December 31, 1997 -- -- -- $(0.54)
December 31, 1996(/8/) -- -- -- $(0.15)
CLASS I SHARES
December 31, 1997 -- -- -- $(0.64)
December 31, 1996 -- -- -- $(0.65)
December 31, 1995 -- -- -- $(0.59)
December 31, 1994 (0.01) -- -- $(0.56)
December 31, 1993 (0.13) -- -- $(0.72)
December 31, 1992 (0.17) -- -- $(0.88)
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
180
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE AVERAGE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO COMMISSION
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%) RATE
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- 4.61 $21.36 32.69% $193,663 0.57% 1.20% -- 12.80%(25) $0.0318
-- 2.60 $16.75 22.49% $ 35,336 0.37% 1.89% -- 12.25% $0.0254
-- 3.50 $14.15 37.35% $ 4,007 0.15% 2.39% -- 10.66% --
-- (0.50) $10.65 1.02% $ 1,197 0.17% 2.71% -- 24.15% --
-- 0.63 $11.15 9.77% $ 960 0.20% 2.59% -- 16.01% --
-- 0.52 $10.52 13.61%+ $ 151 0.22%+ 2.71%+ -- 0.50%++ --
-- 2.51 $13.01 31.71% $ 1,515 1.32% 0.45% -- 12.80%(25) $0.0318
-- 0.50 $10.50 8.09%+ $ 113 1.29%+ 0.57%+ -- 12.25%+ $0.0254
-- 4.62 $21.37 32.97% $639,868 0.32% 1.45% -- 12.80%(25) $0.0318
-- 2.60 $16.75 22.58% $834,368 0.21% 2.05% -- 12.25% $0.0254
-- 3.50 $14.15 37.35% $524,195 0.15% 2.39% -- 10.66% --
-- (0.50) $10.65 1.02% $339,611 0.17% 2.71% -- 24.15% --
-- 0.63 $11.15 9.77% $324,369 0.20% 2.59% -- 16.01% --
-- 0.52 $10.52 13.61%+ $241,907 0.22%+ 2.71%+ -- 0.50%++ --
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----
CONVERSION
TO
CLASS A
SHARES
- ----------
<S> <C>
--
--
--
--
--
--
--
--
--
--
--
--
--
--
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
-- 0.34 $12.11 3.69% $ 26,703 1.35% 0.80% -- 3.56%(26) $0.0323
-- 0.72 $11.77 7.50% $ 10,836 1.23% 0.88% -- 6.37% $0.0697
-- 1.04 $11.05 11.47% $ 988 1.16% 1.43% 1.24% 2.09% --
-- 0.29 $11.37 2.90% $ 1,763 2.10% 0.05% -- 3.56%(26) $0.0323
-- 0.24 $11.08 2.62%++ $ 1,131 2.05%+ 0.75%+ -- 6.37%+ $0.0697
-- 0.35 $12.14 3.98% $487,986 1.10% 1.05% -- 3.56%(26) $0.0323
-- 0.74 $11.79 7.79% $389,997 1.10% 1.01% -- 6.37% $0.0697
-- 1.04 $11.05 11.47% $106,300 1.16% 1.43% 1.24% 2.09% --
-- 0.01 $10.01 1.26%+ $ 36,545 1.15%+ 1.18%+ 1.92%+ 0.30%++ --
- --------------------------------------------------------------------------------------------------------------------------------
-- 0.18 $10.47 8.04% $ 42,343 0.86% 6.01% -- 31.66% --
-- (0.08) $10.29 5.65% $ 18,324 0.79% 6.17% -- 31.62% --
-- 1.16 $10.37 19.48% $ 11,654 0.73% 5.98% -- 36.47% --
-- (1.20) $ 9.21 (6.31%) $ 11,983 0.74% 5.73% -- 54.60% --
-- 0.13 $10.41 8.41% $ 16,491 0.74% 5.44% -- 92.80% --
-- (0.04) $10.28 11.17%+ $ 4,509 0.75%+ 7.04%+ -- 56.30%+ --
-- 0.18 $10.38 7.32% $ 385 1.61% 5.26% -- 31.66% --
-- 0.20 $10.20 3.50%++ $ 122 1.60%+ 1.52%+ -- 31.62%+ --
-- 0.19 $10.48 8.37% $482,679 0.61% 6.26% -- 31.66% --
-- (0.08) $10.29 5.78% $395,105 0.67% 6.29% -- 31.62% --
-- 1.16 $10.37 19.48% $393,656 0.73% 5.98% -- 36.47% --
-- (1.20) $ 9.21 (6.31%) $381,036 0.74% 5.73% -- 54.60% --
-- 0.13 $10.41 8.41% $413,299 0.74% 5.44% -- 92.80% --
-- (0.27) $10.28 6.00% $215,923 0.74% 6.91% -- 56.30% --
- --------------------------------------------------------------------------------------------------------------------------------
--
--
--
--
--
--
--
--
--
- --------------------------------------------------------------------------------------------------------------------------------
--
--
--
--
--
--
--
--
--
--
--
--
--
--
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
181
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
FROM NET
TOTAL REALIZED IN EXCESS
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON OF NET
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS INVESTMENTS
--------- ---------- -------------- ---------- ---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BOND
CLASS A SHARES
December 31, 1997 $10.27 0.63 0.32 $ 0.95 (0.63) -- -- --
December 31, 1996 $10.45 0.67 (0.18) $ 0.49 (0.67) -- -- --
December 31, 1995 $ 9.01 0.63 1.45 $ 2.08 (0.64) -- -- --
December 31, 1994 $10.32 0.61 (1.31) ($0.70) (0.59) -- (0.02) --
December 31, 1993 $10.25 0.76 0.38 $ 1.14 (0.76) -- (0.31) --
December 31,
1992(/2//2/) $10.23 0.56 0.15 $ 0.71 (0.56) -- (0.13) --
CLASS B SHARES
December 31, 1997 $10.27 0.56 0.32 $ 0.88 (0.56) -- -- --
December 31, 1996(/5/) $10.00 0.21 0.27 $ 0.48 (0.21) -- -- --
CLASS I SHARES
December 31, 1997 $10.27 0.66 0.32 $0.98 (0.66) -- -- --
December 31, 1996 $10.45 0.68 (0.18) $0.50 (0.68) -- -- --
December 31, 1995 $ 9.01 0.63 1.45 $2.08 (0.64) -- -- --
December 31, 1994 $10.32 0.61 (1.31) ($0.70) (0.59) -- (0.02) --
December 31, 1993 $10.25 0.76 0.38 $1.14 (0.76) -- (0.31) --
December 31, 1992 $10.55 0.83 (0.17) $0.66 (0.83) -- (0.13) --
- --------------------------------------------------------------------------------------------------------------------------
SHORT BOND
CLASS A SHARES
December 31, 1997 $10.11 0.53 0.06 $ 0.59 (0.54) -- (0.01) --
December 31, 1996 $10.23 0.55 (0.10) $ 0.45 (0.55) -- (0.02) --
December 31, 1995 $ 9.84 0.58 0.39 $ 0.97 (0.58) -- -- --
December 31,
1994(/1//0/) $10.00 0.17 (0.16) $ 0.01 (0.17) -- -- --
CLASS B SHARES
December 31, 1997 $10.02 0.46 0.05 $ 0.51 (0.47) -- (0.01) --
December 31, 1996(/8/) $10.00 0.12 0.04 $ 0.16 (0.12) -- (0.02) --
CLASS I SHARES
December 31, 1997 $10.11 0.56 0.06 $ 0.62 (0.57) -- (0.01) --
December 31, 1996 $10.23 0.55 (0.10) $ 0.45 (0.55) -- (0.02) --
December 31, 1995 $ 9.84 0.58 0.39 $ 0.97 (0.58) -- -- --
December 31,
1994(/1//0/) $10.00 0.17 (0.16) $ 0.01 (0.17) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
MULTI SECTOR BOND
CLASS A SHARES
December 31, 1997 $ 7.84 0.48 0.17 $ 0.65 (0.47) -- (0.02) --
December 31, 1996 $ 8.18 0.41 (0.25) $ 0.16 (0.40) -- (0.10) --
For the period ended
12/31/1995(/1//1/) $ 7.68 0.44 0.72 $ 1.16 (0.44) -- (0.22) --
January 31, 1995 $ 8.25 0.52 (0.57) ($0.05) (0.52) -- -- --
For the period ended
1/31/1994(/1//2/) $ 8.36 0.47 (0.09) $ 0.38 (0.47) -- (0.02) --
CLASS B SHARES
December 31, 1997 $ 7.85 0.42 0.17 $ 0.59 (0.42) -- (0.02) --
December 31, 1996 $ 8.18 0.45 (0.23) $ 0.22 (0.45) -- (0.10) --
For the period ended
12/31/1995(/1//3/) $ 8.13 0.24 0.27 $ 0.51 (0.24) -- (0.22) --
For the period ended
12/2/1994(/1//4/) $ 8.16 0.40 (0.55) ($0.15) (0.40) -- -- --
CLASS I SHARES
December 31, 1997 $ 7.85 0.50 0.17 $ 0.67 (0.49) -- (0.02) --
December 31, 1996 $ 8.18 0.46 (0.24) $ 0.22 (0.45) -- (0.10) --
For the period ended
12/31/1995(/1//1/) $ 7.68 0.47 0.72 $ 1.19 (0.47) -- (0.22) --
January 31, 1995 $ 8.25 0.52 (0.57) ($0.05) (0.52) -- -- --
For the period ended
1/31/1994(/1//2/) $ 8.36 0.47 (0.09) $ 0.38 (0.47) -- (0.02) --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------
RETURN OF TOTAL
CAPITAL DISTRIBUTIONS
--------- -------------
<S> <C> <C>
BOND
CLASS A SHARES
December 31, 1997 -- ($0.63)
December 31, 1996 -- ($0.67)
December 31, 1995 -- ($0.64)
December 31, 1994 -- ($0.61)
December 31, 1993 -- ($1.07)
December 31,
1992(/2//2/) -- ($0.69)
CLASS B SHARES
December 31, 1997 -- ($0.56)
December 31, 1996(/5/) -- ($0.21)
CLASS I SHARES
December 31, 1997 -- ($0.66)
December 31, 1996 -- ($0.68)
December 31, 1995 -- ($0.64)
December 31, 1994 -- ($0.61)
December 31, 1993 -- ($1.07)
December 31, 1992 -- ($0.96)
- --------------------------------------------------------------------------------------------------------------------------
SHORT BOND
CLASS A SHARES
December 31, 1997 -- ($0.55)
December 31, 1996 -- ($0.57)
December 31, 1995 -- ($0.58)
December 31,
1994(/1//0/) -- ($0.17)
CLASS B SHARES
December 31, 1997 -- ($0.48)
December 31, 1996(/8/) -- ($0.14)
CLASS I SHARES
December 31, 1997 -- ($0.58)
December 31, 1996 -- ($0.57)
December 31, 1995 -- ($0.58)
December 31,
1994(/1//0/) -- ($0.17)
- --------------------------------------------------------------------------------------------------------------------------
MULTI SECTOR BOND
CLASS A SHARES
December 31, 1997 -- ($0.49)
December 31, 1996 -- ($0.50)
For the period ended
12/31/1995(/1//1/) -- ($0.66)
January 31, 1995 -- ($0.52)
For the period ended
1/31/1994(/1//2/) -- ($0.49)
CLASS B SHARES
December 31, 1997 -- ($0.44)
December 31, 1996 -- ($0.55)
For the period ended
12/31/1995(/1//3/) -- ($0.46)
For the period ended
12/2/1994(/1//4/) -- ($0.40)
CLASS I SHARES
December 31, 1997 -- ($0.51)
December 31, 1996 -- ($0.55)
For the period ended
12/31/1995(/1//1/) -- ($0.69)
January 31, 1995 -- ($0.52)
For the period ended
1/31/1994(/1//2/) -- ($0.49)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
182
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%)
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- 0.32 $10.59 9.65% $ 125,515 0.86% 6.16% -- 17.60%
-- (0.18) $10.27 4.98% $ 46,977 0.78% 6.59% -- 24.92%
-- 1.44 $10.45 23.75% $ 31,714 0.74% 6.39% -- 41.91%
-- (1.31) $ 9.01 (6.99%) $ 32,053 0.74% 6.36% -- 75.67%
-- 0.07 $10.32 11.39% $ 45,410 0.73% 7.20% -- 111.52%
-- 0.02 $10.25 9.59%+ $ 9,392 0.74%+ 8.12%+ -- 90.45%+
-- 0.32 $10.59 8.91% $ 3,394 1.61% 5.41% -- 17.60%
-- 0.27 $10.27 4.81%++ $ 280 1.59%+ 3.01%+ -- 24.92%+
-- 0.32 $10.59 9.97% $1,101,894 0.61% 6.41% -- 17.60%
-- (0.18) $10.27 5.08% $ 757,627 0.66% 6.71% -- 24.92%
-- 1.44 $10.45 23.75% $ 485,851 0.74% 6.39% -- 41.91%
-- (1.31) $ 9.01 (6.99%) $ 395,116 0.74% 6.36% -- 75.67%
-- 0.07 $10.32 11.39% $ 455,786 0.73% 7.20% -- 111.52%
-- (0.30) $10.25 6.56% $ 312,366 0.73% 8.08% -- 90.45%
- ------------------------------------------------------------------------------------------------------------------------
-- 0.04 $10.15 5.92% $ 4,738 0.82% 5.36% 0.83% 68.04%
-- (0.12) $10.11 4.45% $ 1,033 0.80% 5.35% 0.82% 109.58%
-- 0.39 $10.23 10.07% $ 766 0.75% 5.74% 0.81% 30.94%
-- (0.16) $ 9.84 0.21%+ $ 308 0.75%+ 5.92%+ 0.93%+ 10.20%++
-- 0.03 $10.05 5.19% $ 541 1.57% 4.61% 1.58% 68.04%
-- 0.02 $10.02 2.04%++ $ 56 1.57%+ 1.47%+ 1.59%+ 109.58%+
-- 0.04 $10.15 6.20% $ 234,972 0.57% 5.61% 0.58% 68.04%
-- (0.12) $10.11 4.56% $ 171,427 0.70% 5.45% 0.72% 109.58%
-- 0.39 $10.23 10.07% $ 162,571 0.75% 5.74% 0.81% 30.94%
-- (0.16) $ 9.84 0.21%+ $ 63,931 0.75%+ 5.92%+ 0.93%+ 10.20%++
- ------------------------------------------------------------------------------------------------------------------------
-- 0.16 $ 8.00 8.58% $ 7,832 0.87% 5.83% -- 38.70%
-- (0.34) $ 7.84 2.75% $ 8,798 0.84% 5.75% 0.90% 103.93%
-- 0.50 $ 8.18 15.55%++ $ 6,095 0.94%+ 5.72%+ 1.15%+ 173.26%++
-- (0.57) $ 7.68 (0.45%) $ 69 0.04% 6.70% 2.78% 71.65%
-- (0.11) $ 8.25 5.16%+ $ 65 -- 5.96%+ 3.67%+ 26.54%++
-- 0.15 $ 8.00 7.75% $ 533 1.62% 5.08% -- 38.70%
-- (0.33) $ 7.85 2.09% $ 502 1.58% 5.01% 1.67% 103.93%
-- 0.05 $ 8.18 6.41%++ $ 259 1.60%+ 5.00%+ 1.78%+ 173.26%++
(7.61)(/3/) (0.55) $ -- (1.82%)++ -- -- 6.48%+ 2.58%+ 71.65%++
-- 0.16 $ 8.01 8.86% $ 94,544 0.62% 6.08% -- 38.70%
-- (0.33) $ 7.85 3.14% $ 187,112 0.57% 6.02% 0.66% 103.93%
-- 0.50 $ 8.18 15.90%++ $ 191,930 0.55%+ 6.34%+ 0.67%+ 173.26%++
-- (0.57) $ 7.68 (0.48%) $ 7,101 0.04% 6.70% 2.78% 71.65%
-- (0.11) $ 8.25 5.16%++ $ 5,128 -- 6.21%+ 2.64%+ 26.54%++
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ---------------
CONVERSION
TO AVERAGE
CLASS A COMMISSION
SHARES RATE
- -------------- ----------
<S> <C> <C>
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
- ------------------------------------------------------------------------------------------------------------------------
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
- ------------------------------------------------------------------------------------------------------------------------
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
(7.61)(/3/) --
-- --
-- --
-- --
-- --
-- --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
183
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
FROM NET
TOTAL REALIZED IN EXCESS
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON OF NET
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY GAIN ON RETURN OF
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS INVESTMENTS CAPITAL
--------- ---------- -------------- ---------- ---------- ---------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL BOND
CLASS A SHARES
December 31, 1997 $10.79 0.45 (0.93) ($0.48) (0.43) -- (0.00) -- --
December 31, 1996 $10.75 0.54 0.04 $ 0.58 (0.54) -- -- -- --
For the period ended
12/31/1995(/7/) $10.00 0.98 1.10 $ 2.08 (0.98) (0.01) (0.34) -- --
CLASS B SHARES
December 31, 1997 $10.87 0.41 (0.96) ($0.55) (0.36) -- (0.00) -- --
December 31, 1996 $10.81 0.47 0.06 $ 0.53 (0.47) -- -- -- --
For the period ended
12/31/1995(/7/) $10.00 0.91 1.16 $ 2.07 (0.91) (0.01) (0.34) -- --
CLASS I SHARES
December 31, 1997 $10.85 0.46 (0.93) ($0.47) (0.45) -- (0.00) -- --
December 31, 1996 $10.81 0.59 0.04 $ 0.63 (0.59) -- -- -- --
For the period ended
12/31/1995(/7/) $10.00 1.02 1.16 $ 2.18 (1.02) (0.01) (0.34) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND
CLASS A SHARES
For the period ended
12/31/1997(/2//4/) $10.00 0.19 0.23 $ 0.42 (0.20) -- (0.01) 0.00 --
CLASS B SHARES
For the period ended
12/31/1997(/2//4/) $10.00 0.15 0.25 $ 0.40 (0.19) -- (0.01) 0.00 --
CLASS I SHARES
For the period ended
12/31/1997(/2//4/) $10.00 0.32 0.29 $ 0.61 (0.32) -- (0.01) 0.00 --
- ---------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND
CLASS A SHARES
December 31, 1997 $12.36 0.56 0.54 $ 1.10 (0.59) -- 0.00 -- --
December 31, 1996 $12.64 0.59 (0.18) $ 0.41 (0.58) -- (0.01) (0.10) --
For the period ended
12/31/1995(/1//5/) $12.06 0.48 0.82 $ 1.30 (0.48) -- (0.24) -- --
02/28/95 $12.13 0.60 (0.07) $ 0.53 (0.60) -- -- -- --
02/28/94 $13.25 0.63 (0.15) $ 0.48 (0.63) -- (0.96) (0.01) --
02/28/93 $12.49 0.70 1.01 $ 1.71 (0.70) -- (0.25) -- --
02/29/92 $12.10 0.76 0.47 $ 1.23 (0.76) -- (0.08) -- --
CLASS B SHARES
December 31, 1997 $12.36 0.46 0.54 $ 1.00 (0.50) -- 0.00 -- --
December 31, 1996 $12.65 0.52 (0.21) $ 0.31 (0.49) -- (0.01) (0.10) --
For the period ended
12/31/95(/1//6/) $12.17 0.34 0.72 $ 1.06 (0.34) -- (0.24) -- --
For the period ended
12/2/94(/1//7/) $12.14 0.41 (0.70) ($0.29) (0.41) -- -- -- --
For the period ended
2/28/94(/1//8/) $12.37 0.03 (0.23) ($0.20) (0.03) -- -- -- --
CLASS I SHARES
December 31, 1997 $12.36 0.61 0.51 $ 1.12 (0.62) -- 0.00 -- --
December 31, 1996 $12.63 0.65 (0.20) $ 0.45 (0.61) -- (0.01) (0.10) --
For the period ended
12/31/95(/1//5/) $12.06 0.52 0.81 $ 1.33 (0.52) -- (0.24) -- --
For the period ended
2/28/95(/1//9/) $12.06 0.05 -- $ 0.05 (0.05) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------
TOTAL
DISTRIBUTIONS
-------------
<S> <C>
INTERNATIONAL BOND
CLASS A SHARES
December 31, 1997 ($0.43)
December 31, 1996 ($0.54)
For the period ended
12/31/1995(/7/) ($1.33)
CLASS B SHARES
December 31, 1997 ($0.36)
December 31, 1996 ($0.47)
For the period ended
12/31/1995(/7/) ($1.26)
CLASS I SHARES
December 31, 1997 ($0.45)
December 31, 1996 ($0.59)
For the period ended
12/31/1995(/7/) ($1.37)
- ---------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND
CLASS A SHARES
For the period ended
12/31/1997(/2//4/) ($0.21)
CLASS B SHARES
For the period ended
12/31/1997(/2//4/) ($0.20)
CLASS I SHARES
For the period ended
12/31/1997(/2//4/) ($0.33)
- ---------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND
CLASS A SHARES
December 31, 1997 ($0.59)
December 31, 1996 ($0.69)
For the period ended
12/31/1995(/1//5/) ($0.72)
02/28/95 ($0.60)
02/28/94 ($1.60)
02/28/93 ($0.95)
02/29/92 ($0.84)
CLASS B SHARES
December 31, 1997 ($0.50)
December 31, 1996 ($0.60)
For the period ended
12/31/95(/1//6/) ($0.58)
For the period ended
12/2/94(/1//7/) ($0.41)
For the period ended
2/28/94(/1//8/) ($0.03)
CLASS I SHARES
December 31, 1997 ($0.62)
December 31, 1996 ($0.72)
For the period ended
12/31/95(/1//5/) ($0.76)
For the period ended
2/28/95(/1//9/) ($.05)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
184
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE AVERAGE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO COMMISSION
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%) RATE
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- (0.91) $ 9.88 (4.46%) $ 6,419 1.12% 4.76% 1.33% 4.51% --
-- 0.04 $10.79 5.62% $ 2,006 1.15% 4.74% 1.94% 97.82% --
-- 0.75 $10.75 21.10%++ $ 487 1.33%+ 4.91%+ 3.65%+ 48.03%++ --
-- (0.91) $ 9.96 (5.04%) $ 117 1.87% 4.01% 2.08% 4.51% --
-- 0.06 $10.87 5.01% $ 46 1.90% 3.99% 4.08% 97.82% --
-- 0.81 $10.81 20.90%++ $ 4 2.03%+ 4.39%+ 8.69%+ 48.03%++
-- (0.92) $ 9.93 (4.25%) $ 81,843 0.87% 5.01% 1.08% 4.51% --
-- 0.04 $10.85 5.99% $ 53,845 0.90% 4.99% 1.40% 97.82% --
-- 0.81 $10.81 22.13%++ $ 14,504 0.95%+ 5.71%+ 1.93%+ 48.03%++ --
- ---------------------------------------------------------------------------------------------------------------------------------
-- 0.21 $10.21 8.31%+ $ 570 1.22%+ 7.42%+ 1.43%+ 11.17% --
-- 0.20 $10.20 7.82%+ $ 77 1.97%+ 6.67%+ 2.18%+ 11.17% --
-- 0.28 $10.28 12.64%+ $ 49,150 0.97%+ 7.67%+ 1.18%+ 11.17% --
- ---------------------------------------------------------------------------------------------------------------------------------
-- 0.51 $12.87 9.13% $ 34,729 0.85% 4.65% -- 32.08% --
-- (0.28) $12.36 3.36% $ 29,352 0.83% 4.54% 0.89% 64.51% --
-- 0.58 $12.64 10.95%++ $ 7,426 0.89%+ 4.57%+ 1.04%+ 69.31%++ --
-- (0.07) $12.06 4.45% $ 6,840 1.98% 5.09% 3.89% 60.78% --
-- (1.12) $12.13 3.70% $ 9,234 -- 4.85% 1.44% 175.06% --
-- 0.76 $13.25 14.37% $ 11,290 -- 5.49% 1.59% 88.53% --
-- 0.39 $12.49 10.50% $ 6,591 -- 5.99% 2.75% 66.28% --
-- 0.50 $12.86 8.26% $ 1,312 1.60% 3.90% -- 32.08% --
-- (0.29) $12.36 2.56% $ 672 1.58% 3.79% 1.70% 64.51% --
-- 0.48 $12.65 8.81%++ $ 238 1.66%+ 3.61%+ 2.04%+ 69.31%++ --
11.44(/3/) (12.14) -- (4.30%)++ -- 3.18%+ 4.51%+ 5.85%+ 60.78%++ --
-- (0.23) $12.14 (1.64%)++ $ 2 0.50%+ 4.10%+ 2.91%+ 175.06%++ --
-- 0.50 $12.86 9.32% $355,814 0.60% 4.90% -- 32.08% --
-- (0.27) $12.36 3.76% $338,104 0.58% 4.79% 0.68% 64.51% --
-- 0.57 $12.63 11.20%++ $240,160 0.54%+ 4.95%+ 0.67%+ 69.31%++ --
-- -- $12.06 0.39%++ $220,143 0.65%+ 5.45%+ 0.79%+ 60.78%++ --
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----
CONVERSION
TO
CLASS A
SHARES
- ----------
<S> <C>
--
--
--
--
--
--
--
--
--
- ---------------------------------------------------------------------------------------------------------------------------------
--
--
--
- ---------------------------------------------------------------------------------------------------------------------------------
--
--
--
--
--
--
--
--
--
--
11.44(/3/)
--
--
--
--
--
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
185
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
FROM NET
TOTAL REALIZED IN EXCESS
NET ASSET NET REALIZED INCOME IN EXCESS GAIN ON OF NET
VALUE NET AND UNREALIZED FROM FROM NET OF NET INVESTMENTS & REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT FOREIGN CURRENCY GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME TRANSACTIONS INVESTMENTS
--------- ---------- -------------- ---------- ---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERMEDIATE MUNICIPAL
BOND
CLASS A SHARES
December 31, 1997 $12.10 0.54 0.28 $ 0.82 (0.54) -- (0.06) --
December 31, 1996 $12.25 0.53 (0.09) $ 0.44 (0.51) -- (0.08) --
For the period ended
12/31/95(/1//5/) $11.79 0.44 0.56 $ 1.00 (0.44) -- (0.10) --
February 28, 1995 $12.18 0.55 (0.36) $ 0.19 (0.55) -- (0.03) --
February 28, 1994 $12.79 0.61 0.01 $ 0.62 (0.61) -- (0.62) --
February 28, 1993 $12.25 0.64 0.68 $ 1.32 (0.64) -- (0.14) --
February 29, 1992 $11.95 0.76 0.37 $ 1.13 (0.76) -- (0.07) --
CLASS B SHARES
December 31, 1997 $12.10 0.43 0.30 $ 0.73 (0.45) -- (0.06) --
December 31, 1996 $12.25 0.44 (0.09) $ 0.35 (0.42) -- (0.08) --
For the period ended
12/31/95(/1//5/) $11.80 0.37 0.55 $ 0.92 (0.37) -- (0.10) --
For the period ended
2/28/95(/2//0/) $11.57 0.04 0.23 $ 0.27 (0.04) -- -- --
For the period ended
12/2/94(/1//7/) $12.18 0.37 (0.72) ($0.35) (0.37) -- (0.03) --
For the period ended
2/28/94(/1//8/) $12.32 0.03 (0.14) ($0.11) (0.03) -- -- --
CLASS I SHARES
December 31, 1997 $12.11 0.57 0.28 $ 0.85 (0.57) -- (0.06) --
December 31, 1996 $12.25 0.56 (0.08) $ 0.48 (0.54) -- (0.08) --
For the period ended
12/31/95(/1//5/) $11.80 0.47 0.55 $ 1.02 (0.47) -- (0.10) --
February 28,
1995(/1//9/) $11.57 0.04 0.23 $ 0.27 (0.04) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
MICHIGAN MUNICIPAL BOND
CLASS A SHARES
December 31, 1997 $10.48 0.49 0.44 $ 0.93 (0.48) -- -- --
December 31, 1996 $10.60 0.48 (0.14) $ 0.34 (0.46) -- -- --
December 31, 1995 $ 9.54 0.48 1.06 $ 1.54 (0.48) -- -- --
December 31, 1994 $10.60 0.50 (1.06) ($0.56) (0.50) -- -- --
December 31,
1993(/2//1/) $10.00 0.44 0.59 $ 1.03 (0.43) -- -- --
CLASS B SHARES
December 31, 1997 $10.18 0.38 0.44 $ 0.82 (0.41) -- -- --
For the period ended
12/31/96(/8/) $10.00 0.07 0.17 $ 0.24 (0.06) -- -- --
CLASS I SHARES
December 31, 1997 $10.48 0.51 0.45 $ 0.96 (0.51) -- -- --
December 31, 1996 $10.60 0.49 (0.14) $ 0.35 (0.47) -- -- --
December 31, 1995 $ 9.54 0.48 1.06 $ 1.54 (0.48) -- -- --
December 31, 1994 $10.60 0.50 (1.06) ($0.56) (0.50) -- -- --
December 31,
1993(/2//1/) $10.00 0.44 0.59 $ 1.03 (0.43) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------
RETURN OF TOTAL
CAPITAL DISTRIBUTIONS
--------- -------------
<S> <C> <C>
INTERMEDIATE MUNICIPAL
BOND
CLASS A SHARES
December 31, 1997 -- ($0.60)
December 31, 1996 -- ($0.59)
For the period ended
12/31/95(/1//5/) -- ($0.54)
February 28, 1995 -- ($0.58)
February 28, 1994 -- ($1.23)
February 28, 1993 -- ($0.78)
February 29, 1992 -- ($0.83)
CLASS B SHARES
December 31, 1997 -- ($0.51)
December 31, 1996 -- ($0.50)
For the period ended
12/31/95(/1//5/) -- ($0.47)
For the period ended
2/28/95(/2//0/) -- ($0.04)
For the period ended
12/2/94(/1//7/) -- ($0.40)
For the period ended
2/28/94(/1//8/) -- ($0.03)
CLASS I SHARES
December 31, 1997 -- ($0.63)
December 31, 1996 -- ($0.62)
For the period ended
12/31/95(/1//5/) -- ($0.57)
February 28,
1995(/1//9/) -- ($0.04)
- --------------------------------------------------------------------------------------------------------------------------
MICHIGAN MUNICIPAL BOND
CLASS A SHARES
December 31, 1997 -- ($0.48)
December 31, 1996 -- ($0.46)
December 31, 1995 -- ($0.48)
December 31, 1994 -- ($0.50)
December 31,
1993(/2//1/) -- ($0.43)
CLASS B SHARES
December 31, 1997 -- ($0.41)
For the period ended
12/31/96(/8/) -- ($0.06)
CLASS I SHARES
December 31, 1997 -- ($0.51)
December 31, 1996 -- ($0.47)
December 31, 1995 -- ($0.48)
December 31, 1994 -- ($0.50)
December 31,
1993(/2//1/) -- ($0.43)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Highlights.
Pegasus Funds
186
<PAGE>
PEGASUS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
RATIO OF
EXPENSES TO
NET RATIO OF NET AVERAGE NET
CONVERSION ASSETS RATIO OF INVESTMENT ASSETS(%)
TO NET CHANGE NET ASSET END OF EXPENSES INCOME TO WITHOUT FEE
CLASS A IN NET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET WAIVERS/ PORTFOLIO
SHARES ASSET VALUE OF PERIOD RETURN(A) (000'S OMITTED) NET ASSETS(%) ASSETS(%) REIMBURSED EXP. TURNOVER(%)
- ---------- ----------- ---------- --------- --------------- ------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- 0.22 $12.32 7.05% $ 18,903 0.84% 4.41% -- 36.82%
-- (0.15) $12.10 3.69% $ 19,049 0.83% 4.37% 0.88% 52.95%
-- 0.46 $12.25 8.58%++ $ 17,777 0.83%+ 4.30%+ 0.97%+ 44.75%++
-- (0.39) $11.79 1.64% $ 17,243 0.29% 4.73% 1.38% 128.02%
-- (0.61) $12.18 4.94% $ 28,826 0.06% 4.78% 1.27% 167.95%
-- 0.54 $12.79 11.26% $ 27,885 -- 5.16% 1.31% 63.67%
-- 0.30 $12.25 9.78% $ 18,310 -- 6.15% 1.72% 86.91%
-- 0.22 $12.32 6.19% $ 709 1.59% 3.66% -- 36.82%
-- (0.15) $12.10 2.90% $ 611 1.58% 3.62% 1.68% 52.95%
-- 0.45 $12.25 7.75%++ $ 341 1.71%+ 3.36%+ 2.01%+ 44.75%++
-- 0.23 $11.80 2.30%++ $ 6 1.36%+ 3.72%+ 1.64%+ 128.02%++
(11.43)(/8/) (0.75) -- (2.98%)++ -- 0.76%+ 4.03%+ 2.00%+ 128.02%++
-- (0.14) $12.18 (0.93%)++ $ 12 0.75%+ 1.68%+ 3.00%+ 167.95%++
-- 0.22 $12.33 7.29% $377,331 0.59% 4.66% -- 36.82%
-- (0.14) $12.11 4.05% $373,970 0.58% 4.62% 0.64% 52.95%
-- 0.45 $12.25 8.76%++ $373,753 0.55%+ 4.78%+ 0.68%+ 44.75%++
-- 0.23 $11.80 2.37%++ $365,801 0.50%+ 4.79%+ 0.60%+ 128.02%++
- ------------------------------------------------------------------------------------------------------------------------
-- 0.45 $10.93 9.15% $ 18,687 0.92% 4.59% 0.98% 37.84%
-- (0.12) $10.48 3.32% $ 18,575 0.88% 4.57% 0.96% 24.49%
-- 1.06 $10.60 16.49% $ 21,034 0.79% 4.71% 1.04% 26.97%
-- (1.06) $ 9.54 (5.42%) $ 21,106 0.53% 5.01% 1.05% 25.93%
-- 0.60 $10.60 11.50%+ $ 26,342 0.19%+ 5.12%+ 1.21%+ 41.70%++
-- 0.41 $10.59 8.26% $ 707 1.67% 3.84% 1.73% 37.84%
-- 0.18 $10.18 2.45%++ $ 110 1.69%+ 2.01%+ 1.77%+ 24.49%+
-- 0.45 $10.93 9.42% $ 61,768 0.67% 4.84% 0.73% 37.84%
-- (0.12) $10.48 3.44% $ 41,909 0.77% 4.68% 0.85% 24.49%
-- 1.06 $10.60 16.49% $ 32,419 0.79% 4.71% 1.04% 26.97%
-- (1.06) $ 9.54 (5.42%) $ 24,157 0.53% 5.01% 1.05% 25.93%
-- 0.60 $10.60 11.50%+ $ 15,772 0.19%+ 5.12%+ 1.21%+ 41.70%++
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ---------------
CONVERSION
TO AVERAGE
CLASS A COMMISSION
SHARES RATE
- -------------- ----------
<S> <C> <C>
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
(11.43)(/8/) --
-- --
-- --
-- --
-- --
-- --
- ------------------------------------------------------------------------------------------------------------------------
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Financial Statements.
Pegasus Funds
187
<PAGE>
(1) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares under the then-current sales load schedule and
such shares converted to Class A Shares.
(2) For the period March 3, 1995 (re-offering date of Class B Shares) through
December 31, 1995.
(3) On December 2, 1994, the Fund terminated its offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
(4) For the period March 3, 1995 (initial offering date of Class I Shares)
through December 31, 1995.
(5) For the period August 24, 1996 (initial offering date of Class B Shares)
through December 31, 1996.
(6) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(7) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(8) For the period September 23, 1996 (initial offering date of Class B Shares)
through December 31, 1996.
(9) For the period December 3, 1994 (commencement of operations) through
December 31, 1994.
(10) For the period September 17, 1994 (commencement of operations) through
December 31, 1994.
(11) For the period February 1, 1995 (commencement of operations) through
December 31, 1995. Effective February 1, 1995, the Fund changed its fiscal
year end from January 31 to December 31.
(12) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
(13) For the period May 31, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective February 1, 1995, the Fund changed its fiscal
year end from January 31, to December 31.
(14) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares and such shares converted to Class A shares.
(15) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
(16) For the period April 4, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective March 1, 1995, the Fund changed its fiscal
year end from February 28 to December 31.
(17) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
SEE NOTES TO FINANCIAL HIGHLIGHTS
Pegasus Funds
188
<PAGE>
(18) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
(19) For the period February 1, 1995 (initial offering date of Class I Shares)
to February 28, 1995.
(20) For the period January 30, 1995 (re-offering date of Class B Shares)
through February 28, 1995.
(21) For the period February 1, 1993 (commencement of operations) through
December 31, 1993.
(22) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(23) For the period July 10, 1992 (inception) through December 31, 1992.
(24) For the period June 30, 1997 (commencement of operations) through December
31, 1997.
(25) The Portfolio Turnover Percentage was adjusted for Redemptions In-Kind for
shareholders that took place during 1997 for the Equity Index, Mid-Cap
Opportunity and Intrinsic Value Funds. Each Fund's securities sales were
appropriately reduced by the fair market value of the Redemptions In-Kind.
The Redemptions In-Kind for the Equity Index, Mid-Cap Opportunity and
Intrinsic Value Funds were approximately $260 million, $4 million and $5
million, respectively.
(26) The Portfolio Turnover Percentage was adjusted for a conversion of assets
from First National Bank of Chicago's International Equity Common Trust
Fund, which took place during 1997. The Fund's securities purchases were
appropriately reduced by the fair market value of the asset transfer
approximating $20 million.
(a) Total returns as presented do not include any applicable sales load or
redemption charges.
+ Annualized.
++ Not Annualized.
Pegasus Funds
189
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of the Pegasus Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the PEGASUS FUNDS (comprising, as
indicated in Note 1, the Managed Assets Conservative, Managed Assets Balanced,
Managed Assets Growth, Equity Income, Growth, Mid-Cap Opportunity, Small-Cap
Opportunity, Intrinsic Value, Growth and Value, Equity Index, International
Equity, Intermediate Bond, Bond, Short Bond, Multi Sector Bond, International
Bond, High Yield Bond, Municipal Bond, Intermediate Municipal Bond and the
Michigan Municipal Bond Funds), as of December 31, 1997, and the related
statements of operations for the period then ended, changes in net assets and
financial highlights for each of the two years in the periods then ended. We
have also audited the financial highlights for each of the periods from
inception (as indicated in Note 1) through December 31, 1995, of the Managed
Assets Balanced, Mid-Cap Opportunity, Intrinsic Value, Growth and Value, Equity
Index, International Equity, Intermediate Bond, Bond, Short Bond and Michigan
Municipal Bond Funds. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the periods from inception (as
indicated in Note 1) through December 31, 1995, of the Managed Assets
Conservative, Equity Income, Growth, Small Cap Opportunity, Multi Sector Bond,
International Bond, Municipal Bond and the Intermediate Municipal Bond Funds
were audited by other auditors whose report dated February 23, 1996, expressed
an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included physical counts and confirmation of
securities owned as of December 31, 1997, by inspection and correspondence with
custodians, banks and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Pegasus Funds as of December 31, 1997,
the results of their operations for the period then ended and the changes in
their net assets and the financial highlights for each of the two years in the
periods then ended in conformity with generally accepted accounting principles.
The financial highlights for each of the periods from inception (as indicated
in Note 1) through December 31, 1995, of the Managed Assets Balanced, Mid-Cap
Opportunity, Intrinsic Value, Growth and Value, Equity Index, International
Equity, Intermediate Bond, Bond, Short Bond and the Michigan Municipal Bond
Funds present fairly, in all material respect, the financial highlights in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Detroit, Michigan,
February 24, 1998.
Pegasus Funds
190
